The U.S. Treasury held an auction for $25 billion in 30-year bonds, with a high yield of 4.813%. The WI level was at 4.792%, resulting in a tail of 2.1 basis points, compared to a six-month average of -0.2 basis points. The auction’s bid-to-cover ratio was 2.27X, lower than the six-month average of 2.38X. Direct bidders made up 23%, and indirect bidders accounted for 59.5%. Both groups were below their averages of 24.2% and 61.9%. Dealers took 17.5%, which is above the six-month average of 13.9%.

Low Demand In The Auction

Overall, demand in the auction was low, with all key metrics falling short of the six-month averages. The performance of the auction received a grade of D. Recent auctions for three-year and 10-year notes had mixed results, with the 10-year auction performing below average. At the same time, U.S. stock indices had mixed results: the NASDAQ gained 0.14%, while the S&P index fell by 0.26%. Today’s 30-year Treasury auction results are disappointing, earning a D grade. Key demand indicators from both domestic and international buyers were below recent averages, forcing dealers to take on a larger share. This shows the market is struggling to manage the supply of government debt at these levels. This weakness aligns with recent broader economic data. The July 2025 CPI report indicated core inflation rose to 3.8%. This rise has stopped the Federal Reserve from hinting at potential rate cuts. Persistent inflation makes long-term bonds less appealing and suggests yields may need to increase to attract buyers.

Strategies For Traders

For derivative traders, this situation calls for a more cautious approach in the upcoming weeks. We should consider buying put options on broad market indices like the S&P 500 as a hedge. Rising long-term rates increase corporate borrowing costs and affect equity valuations, creating challenges for stocks. We witnessed a similar situation in 2022 when rising yields drove the bear market in equities. Today’s weakness in the NASDAQ, even on a quiet day, shows the market has not forgotten this lesson. Technology and growth sectors are especially at risk when long-term interest rates rise. Another tactic is to expect increased market fear by buying call options on the VIX. The VIX is currently at a calm level of 16, but today’s bond auction could trigger volatility. A sharp rise in yields often precedes a spike in the VIX, as equity investors rush to hedge. In the bond market, prices seem to be trending lower. With poor demand noted in both the 10-year and 30-year auctions this week, the momentum favors short positions in Treasury futures like the /ZB. We would need to see a significant uptick in demand metrics before reassessing this stance. Create your live VT Markets account and start trading now.

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