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The market is confident that the Fed will cut interest rates this year, and the demand for the two-year US Treasury bond auction has surged, with overseas buying hitting a record high

2024-07-24

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The results of this 2-year US Treasury auction highlight the strong demand, which is reflected in many indicators, and overseas demand even set a record. Analysts said that the Federal Reserve will hold an FOMC meeting next week, and the market generally expects the United States to cut interest rates in September, so it rushed into short-term US bonds before the rate cut.

On Tuesday local time, the US Treasury Department auctioned 69 billion US dollars of two-year Treasury bonds. The auction results were strong, the market demand was large, and overseas buying set a record.

The winning bid rate of this 2-year US Treasury auction was 4.434%, which was significantly lower than 4.706% on June 25, with a difference of 27.2 basis points. The winning bid rate for the 2-year Treasury bond this time also hit the lowest level since January this year. The winning bid rate this time is 2.3 basis points lower than the pre-issue rate of 4.457%, which is the second largest gap between the two on record, only smaller than that in March 2023, highlighting the strong market demand.

The bid multiple for the 2-year Treasury bond this time was 2.81, higher than 2.75 last month, the highest level since August 23 last year, and much higher than the average of 2.58 in the past six months.

As an indicator of domestic demand in the United States, the allocation ratio of direct bidders (Direct Bidders), including hedge funds, pension funds, mutual funds, insurance companies, banks, government agencies and individuals, was 14.4%, the lowest since January this year.

Overseas demand was extremely strong. As an indicator of overseas demand, indirect bidders, who usually participate in the bidding through primary dealers or brokers, such as foreign central banks, received a 76.6% allocation ratio, higher than 65.6% in June, setting a record high.

As the "taker" who takes over all unpurchased supplies, primary dealers received only 9% of the allocation ratio in this round, which is a record low thanks to the surge in overseas demand.

After the 2-year US Treasury auction ended, the 2-year US Treasury yield fell, and the 10-year US Treasury yield also fell to an intraday low.

Analysts said that the Federal Reserve will hold an FOMC meeting next week, and the market generally expects the United States to cut interest rates in September, so they are rushing into short-term US Treasury bonds before the rate cut.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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The market is confident that the Fed will cut interest rates this year, and the demand for the two-year US Treasury bond auction has surged, with overseas buying hitting a record high

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