The eagerly awaited Treasury-bond auction could serve as a referendum on the GOP tax bill.
US Treasury auctions happen all the time, and they’re usually unremarkable for markets. But this week’s offering of 30-year government bonds will take on heightened importance.
That’s because it could represent an important test of what investors think about Donald Trump’s so-called «Big Beautiful» tax bill. Yields on government bonds have risen in recent weeks as bond traders have dumped the fixed-income securities.
The logic of their trading activity is straightforward: Amid concerns that the tax bill will further inflate a sizable federal deficit — and with so much uncertainty swirling around Trump policies overall — the appeal of holding long-dated government debt has taken a hit.
The slate of bond auctions scheduled for this week is heavy, with $58 billion of three-year notes to be sold on Tuesday and $59 billion of 10-year bonds up for auction on Wednesday.
But amid the deluge of supply, investors will likely be watching the $22 billion sale of 30-year debt the closest.
The auction happens at a time when the safety and soundness of long-dated government bonds are being scrutinized more than ever, and not just in the US. Governments around the world have seen their debt costs spiral higher this year as bond investors question the wisdom of lending to countries running huge deficits and fueling their spending sprees with more and more debt.
In the US, the concern is that the federal government — already running a steep budget deficit — is laying the groundwork for more issues down the road if lawmakers pass the Republicans’ sweeping spending and tax bill.
