Understanding Treasury Bonds: Yield Predictions for the Upcoming 25-Year Auction

July 18, 2025

Friends,

“First, A new Treasury Bond issued for the first time at the Primary Market is always at Par. This is because its Coupon rate is always equal to its Yield Rate the first time it’s first Auctioned off.

So the 25 year Treasury Bond will not have a discount on August 6, 2025”

One of the biggest questions I received was about the predicted yield for the upcoming 25-year treasury bond and its coupon rate.

To predict the yield and the coupon rate for the 25-year bond, it is essential to understand that yield rates for treasury bonds are extrapolatory in nature. You must pay attention to how each tenor and the increasing time affect the other yield rates.

For example, the longer the term of the treasury bond, the higher the yield it will have. This means that a 10-year treasury bond will have a higher yield than a 5-year treasury bond. Similarly, a 15-year treasury bond will yield more than a 10-year treasury bond, a 20-year treasury bond will yield more than a 15-year treasury bond, and a 25-year treasury bond will automatically have a higher yield than a 20-year treasury bond.

In the auction next month, the government will auction two long-term treasury bonds: the reopening of the 15-year 2039 treasury bond and the new 25-year treasury bond. The last time the 15-year treasury bond was auctioned, it yielded 17.795% in June 2025.

Since then, a 20-year treasury bond has yielded 17.9 percent. If this trajectory continues, the 15-year treasury bond in the upcoming August auction might yield anything above 17.5 percent to 17.7 percent, as it has been performing over the last 4-5 months.

Additionally, considering the recently auctioned 20-year treasury bond, which yielded 17.9 percent last week and 17.945 percent in the May auction, these yield rates can provide a starting projection for what the yield and coupon rate for the 25-year treasury bond might be.

Remember, this will be the first time the 25-year treasury bond is being sold, so we do not know its coupon rate or yield rate and what it’s demand is going to be. However, we can use the available data to make a better-informed decision as investors.

If the 15-year treasury bond in the upcoming auction yields, let's say, 17.5 percent and has 14 years remaining until 2039, then the 25-year bond, which will be available for the first time and extends to 2050, is expected to have a higher yield by at least a minimum of 50 basis points over the 15-year treasury bond.

This trend is consistent; whenever there is a gap of over 10 years between bonds, their yields will typically differ by at least 50 basis points. In good auctions, this difference can even reach 100 basis points.

Therefore, if the 15-year bond yields 17.5%, the 25-year bonds would likely yield at least 18 percent. If the 15-year bond brings in just 17% then, the 25-year bond will yield in at least 17.5%.

Given that the recent auction for the 20-year bond yielded 17.9 percent, we can expect the 15-year bond to yield a lower interest rate, possibly between 17% to 17.7%.

From there, we can add 50 basis points to estimate the yield for the 25-year treasury bond which brings the 25-year treasury bonds will between 17.5% and above.

The higher the yield, the better, as investors will be locking in a favorable rate for an extended period.

Happy Investing Everyone

Alex Kakande