Investors are approaching the U.S. Treasury’s $22 billion 30-year bond sale cautiously after an underwhelming auction last month. Analysts believe the smaller size of this auction could be easier to absorb, but worries about fiscal deficits and high national debt continue to grip sovereign debt markets globally.

Last month’s 30-year bond auction had the lowest bid-to-cover ratio since November 2023 at 2.27. End-user demand slumped to 82.5%, the worst since August 2024. Direct bidders are firms like pension funds, while indirect bidders include foreign investors who submit competitive bids through an intermediary.

U.S. government debt, especially long-dated bonds, are facing headwinds, with the yield curve steepening to 126 basis points last Friday – the widest level in over four years. The curve has flattened slightly this week as investors reduce their steepening positions ahead of Thursday’s 30-year auction.

Analysts believe this 30-year bond auction could be different, citing the Fed’s more dovish tone since the Jackson Hole gathering. With weaker U.S. job reports, the market is more confident about slower growth sentiment. The 30-year yield has declined by 28 basis points since last Wednesday.

The long bond sale could receive support following a successful three-year note auction and a solid sale of benchmark 10-year notes earlier this week. The three-year note sale had good support from indirect bids, while the 10-year note auction had a strong bid-to-cover ratio and a high percentage of supply awarded to indirect bidders.

Read more at Yahoo Finance: Investors wary of Treasury’s 30-year bond auction after recent disappointments