The 20-year Treasury yield retreats as German bond auction highlights cooling demand for ultra-long maturities

⑴ The German central bank auctioned 20-year supplementary government bonds on Wednesday, with an issuance size of 971 million euros and an average yield of 3.40%, a significant decrease from the previous 3.54% for the same maturity. ⑵ The bid-to-cover ratio for this maturity was reported as 2.2 times, lower than the previous 3.1 times, indicating that market demand has weakened. ⑶ On the same day, the 30-year supplementary government bonds were auctioned with an issuance size of 1.136 billion euros and an average yield of 3.49%, compared to 3.50% previously, showing little change. ⑷ The 30-year bid-to-cover ratio was 1.3 times, down from the previous 1.8 times, with a more evident cooling in demand for ultra-long-term bonds. ⑸ Judging from the results of the two auctions, although lower secondary market yields have reduced the cost of new bond issuance, the simultaneous decline in bid-to-cover ratios also reflects a lack of enthusiasm for buying at higher prices. ⑹ The cooling demand for ultra-long-term bonds may suggest that investors remain cautious about the inflation outlook and fiscal policy prospects, and it will be necessary to monitor whether future interest rate trends can stimulate new allocation willingness.