What will be the impact of the collapse of the 20-year Treasury auction?

On November 20, the US Treasury auctioned 16 billion US dollars of 20-year Treasury bonds, the results were dismal, and many important indicators were not good, and industry insiders bluntly said that the auction was disastrous. The winning rate for the 20-year note was 4.680%, up from 4.590% on Oct. 23. The pre-issue interest rate of this auction is 4.650%, and the final winning interest rate is 3 basis points higher than the pre-issue interest rate. The auction's bid multiple was 2.34, the lowest since August 2022, compared to 2.59 in the previous auction. This is not only the third consecutive tail spread showing weak demand, but also the second largest on record.

The results of the 20-year Treasury auction reflect extremely weak domestic demand, which may be related to a variety of factors, including the current economic situation, market expectations, and investors' risk appetite. At the same time, sluggish domestic demand in the United States may also be related to a prolonged period of slower economic growth, weak consumer confidence, and policy uncertainty. In addition, the outcome of the auction has had a complex and multifaceted impact on financial markets. The first is the turmoil and uncertainty in the financial market, and the auction rollover has led to a rise in the yield of US Treasuries, reflecting the weak demand for US Treasuries in the market and the sentiment of concern. A poor auction result for long-term Treasuries could further exacerbate concerns about the Treasury market, causing prices to continue to fall, which in turn increases uncertainty and volatility in the market. A decline in Treasurys tends to have a negative impact on the U.S. stock market because Treasurys are often seen as a safe haven asset and their decline can trigger investor panic, causing more investors to sell Treasuries. U.S. stocks are likely to move sharply, and may even trend lower, after the Treasury auction tumbles. At the same time, when Treasuries fall, investors may turn to safer assets, putting pressure on the U.S. stock market. The US stock market may fluctuate significantly after the US Treasury auction overturned, and may even show a downward trend, which will have a negative impact on the overall sentiment of the stock market and investment confidence.

Second, investor confidence is frustrated, the auction rollover may lead to a decline in investors' confidence in the US bond market, and they are worried that the US bond market may have more uncertainty in the future. That could lead investors to cut back on purchases or trigger selling, further exacerbating the market's downward trend. Treasurys and stocks are important components of the financial market, and their decline could trigger investor concerns about the overall trend of the stock market and the overall financial market. That could lead investors to be more cautious and reduce their exposure to the U.S. stock market, further increasing volatility. Treasury and stock prices are important components of global financial markets, and their declines could spark investor concerns about global financial markets. This could cause investors to reduce their exposure to global markets, further increasing volatility in global financial markets.

Third, the impact on the economy, the decline in US bonds and US stocks may have a negative impact on global economic growth. The fall in US Treasuries and stocks could trigger a reallocation of global capital. Investors may seek other, more attractive investment opportunities, leading to capital outflows from the Treasury and stock markets to other markets or asset classes. That in turn affects global economic growth. In addition, if the instability of the US Treasury market increases, it could trigger turmoil in global financial markets and further restrain global economic growth. The decline in US Treasuries and US stocks may increase volatility in global financial markets and lead to increased instability in financial markets. This instability could have a negative impact on the stability and sustainable development of the global economy.

To sum up, the impact of the 20-year US bond auction crash and the fall of US Treasuries and US stocks is multifaceted. These influences interweave and interact with each other, which together constitute the complex situation of the current financial market.