All Eyes on the 20-Year Treasury Auction — The First Big Test for U.S. Debt Demand After Moody’s Downgrade

TradingKey - Following Moody’s downgrade of the U.S. sovereign credit rating and growing concerns over Trump’s tax-cutting “Beautiful Big Bill,” global investors are closely watching the upcoming $16 billion auction of 20-year U.S. Treasury bonds, which will serve as the first major test of demand for U.S. debt after the loss of its last AAA credit rating.

On Wednesday, May 21, the U.S. Treasury is scheduled to conduct a $16 billion auction of 20-year Treasury bonds, with results due out at 1:00 PM ET that same day. Last Friday (May 16), Moody’s downgrade marked the first time in history that the United States simultaneously lost its AAA rating from all three major international credit rating agencies.

Vanguard portfolio manager Brian Quigley described the auction as “must-see TV.” With both the 20-year and 30-year Treasury yields hovering around 5%, Quigley said this auction will be a key indicator of long-term Treasury demand in the new fiscal environment.

At the time of writing, the yield on the 20-year Treasury bond stood at 5.021%, up 50 basis points from around 4.50% at the end of April.

Yield Trend of U.S. 20-Year Treasury in 2025, Source: Investing.com

Consistent with Moody’s rationale for the downgrade, investor sentiment has also turned cautious toward Trump’s ambitious “Beautiful Big Bill”, which includes large-scale tax cuts largely unfunded by new revenue sources. 

Wall Street institutions like UBS believe the recent downgrade may not significantly impact Treasury demand, suggesting that the rise in bond yields could remain limited.

TradingKey Senior Economist Jason Tang noted that given the precedents set by S&P's downgrade in 2011 and Fitch's in 2023, financial markets have shown a desensitized response to this event.