The US Treasury's sale of $25 billion in 30-year bonds on Thursday met with disappointing demand, adding to signs that appetite is softening at the long end of the yield curve for a second consecutive session. Results at the long end draw close attention because 30-year yields serve as a reference point for long-term borrowing costs across credit markets.

The auction stopped at a high yield of 5.441%, a 0.4 basis point tail against the 5.437% when-issued yield at the bid deadline. A tail occurs when the auction's high yield lands above the pre-auction when-issued level, meaning bidders demanded extra compensation relative to where the bond traded before the sale. That marks a deterioration from last month's 0.1 basis point tail and compares unfavorably with the six-auction average of a 0.1 basis point stop-through.

The bid-to-cover ratio — total bids received relative to the amount awarded, with lower readings generally pointing to thinner demand — fell to 2.36x from 2.54x at the previous sale, and also came in below the 2.44x six-auction average.

The composition of buyers offered little encouragement. Indirect bidders, a category that includes foreign central banks and other institutional investors, took 68.11% of the offering, down from 72.32% last month and below the 70.49% average. Dealers were left holding 11.39%, up sharply from 6.79% in the prior auction and above the 9.49% average — a heavier take-down for a group that is obligated to bid at Treasury auctions and typically resells its allotment in the secondary market. Direct bidders accounted for 20.5%, roughly in line with recent averages.

The soft result follows Tuesday's lackluster 10-year auction and suggests investors remain reluctant to aggressively add duration, even after yields had cheapened ahead of the sale.

There was one point of relief: the high yield came in well below last month's 5.618%. Even so, that reflects the broader rally in bonds rather than any strengthening of underlying demand.

The takeaway is another weak long-end auction, with the sharply higher dealer allocation the most troubling element. How quickly dealers place the enlarged allotment with end investors is one gauge traders typically watch after a soft sale. It was not a disaster, but it hardly amounts to a vote of confidence in the long end of the US Treasury market.