Bond Yields Slide as Easing Greenland Tensions and Strong 20-Year Treasury Auction Lift Sentiment

Bond yields slipped on Wednesday as traders reacted to the alleviation in geopolitical tensions and a fairly strong auction results for a long-dated bond

Trump Softens Greenland Rhetoric: After threatening eight European nations with additional tariffs unless he is given the go ahead to annex Greenland, U.S. President Donald Trump relented. Following his address to the World Economic Form (WEF) on Wednesday, the president said in a post on Truth Social that a framework for a future deal with respect to Greenland and the whole of the Arctic region has been reached between him and North Atlantic Treaty Organization (NATO) Secretary General Mark Rutte.

He also confirmed that pursuant to the framework agreement, he would not impose the 10% additional tariff that was set to go into effect on Feb. 1.

The development paused the “Sell America” trade that emerged following the escalation in geopolitical tensions surrounding Greenland. Equities rallied and bonds rallied along with them, sending yields lower.

Yields fell across the maturity spectrum, with the benchmark U.S. 10-year Treasury note shedding 4.2 basis points to 4.2530%. The 20-year Treasury bond climbed more than 5 basis points to 4.87% and the two-year Treasury note yielded 3.591%, down less than a basis point.

Source: TradingView

How Investors Responded To 20-Year Bond Auction: The $13 billion auction of 20-year Treasury bonds was awarded at 4.846%, about one basis point lower than the prevailing yield at the bidding deadline. The fact that investors were willing to purchase for a lower yield suggests strong demand. The bid-to-cover ratio was at a healthy 2.86. The yield and bid-to-cover ratio for the most recent auction was better than the corresponding numbers of 4.789% and 2.67 for a previous 20-year debt auction held on Dec. 11.

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