US Treasury 30-Year Bond Auction Sees Strong Demand Amid Worries Over Budget Deficits and Trade War

The US Treasury sold $22 billion in 30-year bonds with stronger-than-expected demand, easing concerns over investors shunning the government's longest maturity. The auction drew a yield of 4.844%, below the auction deadline, and 30-year bonds extended their gains. The solid result comes after weeks of fretting over budget deficits and President Trump's trade war.

The US Treasury sold $22 billion in 30-year bonds today, with stronger-than-expected demand, easing concerns over investors shunning the government's longest maturity. The auction drew a yield of 4.844%, below the auction deadline, and 30-year bonds extended their gains. This solid result comes after weeks of fretting over budget deficits and President Trump's trade war.

The $22 billion sale, scheduled for 1 p.m. New York time, was part of the government’s regularly scheduled borrowings. It took place as Congress considers President Donald Trump’s massive tax bill, which by some projections will add trillions of dollars to US budget gaps, potentially requiring more bond issuance to finance the spending. The backdrop of spiraling deficits and worries about the president’s trade war has punished long-term US debt, particularly the 30-year Treasury.

Inflation remains above the Fed's 2% target, and policymakers have signaled they are waiting to see how much tariffs lift consumer inflation before they ease rates further. Despite these risks, bond managers have favored shorter-term Treasuries, with some, like DoubleLine Capital and Pacific Investment Management Co., allocating less to the long end. Pimco reiterated its underweight stance on long-maturity debt over the next half-decade, while DoubleLine’s Jeffrey Gundlach said long-term Treasuries are no longer seen as legitimate risk-free investments.

Ahead of today’s auction, the 30-year bond yielded around 4.9%, more than a half-point above its early April low. Since peaking in May, the yield has settled into a range that suggests 5% is attracting buyers, and that level is seen as a ceiling heading into the auction. Gregory Peters, co-chief investment officer at PGIM Fixed Income, noted that the long end is trading cheap for quite some time due to the substantial debt that needs to be refinanced and financed, not including additional debt from the tax bill before Congress.

Despite the risks, Guneet Dhingra, head of US rates strategy at BNP Paribas SA, sees a case for buying the 30-year around current levels, reflecting the worsening fiscal picture and potential for strong auction demand or easing of deficit fears. The focus will be on demand metrics for the sale and where its yield clears relative to the pre-auction bidding deadline.

The auction's success indicates that investors are not entirely shunning long-term US debt, providing a positive signal for the bond market. The Treasury Department will release a breakdown of domestic- and foreign-based buyers later this month, which will offer further insights into the auction's outcome.

References:
[1] https://www.bloomberg.com/news/articles/2025-06-12/us-long-dated-debt-faces-crucial-test-in-22-billion-auction
[2] https://finance.yahoo.com/news/us-long-dated-debt-faces-061500572.html
[3] https://www.cnbc.com/2025/06/10/inflation-data-treasury-auctions-to-test-the-bond-market-what-to-expect.html