10-year Treasury yield falls from 24-year high after solid bond auction eases demand fears
Quick Look
- Treasury yields declined from session highs following a robust $39 billion auction of 10-year notes, which saw strong demand from non-dealers and indirect bidders.
- The 10-year yield had earlier peaked at 5.35%, its highest level since 2002, before settling near 5.282%.
- Global bond markets also experienced selling pressure, with French and UK 10-year yields rising.
AI-generated summary
Why It Matters
U.S. Treasury yields have been rising due to investor concerns about inflation and rising energy prices, with the 10-year yield surging 60 basis points since the end of July. The Treasury is conducting a series of weekly auctions and buyback operations to manage liquidity.
U.S. Treasury yields came off their highs after a solid sale of 10-year notes. Earlier, the 10-year yield rose to its highest level in more than two decades.
The 10-year Treasury last traded around 1 basis point higher at 5.282%. Earlier in the session, it reached 5.35%, its highest level since 2002. The 30-year Treasury bond yield also traded below a 24-year high, at 5.655%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
The Treasury sold $39 billion of 10-year notes in an auction on Wednesday. According to BMO, the sale was "strong", with higher than average bidding from non-dealers. Indirect bidders, which include global central banks, took 80.3% of the auction — above a 10-auction average of 72.4%.
Nonetheless, it still was the highest auction yield since 2000.
This was the second of three Treasury Department sales this week. The government sold $58 billion in 3-year notes on Tuesday and is scheduled to sell $22 billion 30-year bonds on Thursday.
Treasury also will stage its latest buyback operation on Thursday, when it will be targeting maturities between 20 years and 30 years. The liquidity support operation will be at least $4 billion, or double the normal size. The last buyback in that range came to just over $4 billion.
Bonds have been selling off recently with investors concerned about inflation and rising energy prices. The 10-year has surged 60 basis points since the end of July, , while U.S. crude prices have soared 20% in that time.
Selling pressure is also picking up overseas. The yield on the 10-year French bond surged 12 basis points to trade at 4.876%. The 10-year U.K. Gilt yield jumped 7 basis points to 5.447%.
Against that backdrop, FOMC meeting minutes will be released at 2 p.m. ET. Traders will parse them for potential insights on Fed monetary policy decision-making. At the Fed's September meeting, policymakers voted to raise interest rates for the first time since 2023.
This comes amid rising inflation fears, as the latest New York Fed's Survey of Consumer Expectations showed that the one-year inflation outlook jumped to its highest level since May 2023.
What to Watch
AI outlook — possibilities, not facts
FOMC meeting minutes will be released at 2 p.m. ET and analyzed for insights on future monetary policy
Certain · Within hours
Treasury will conduct its latest buyback operation on Thursday targeting 20-30 year maturities
Certain · Within days
Treasury is scheduled to sell $22 billion in 30-year bonds on Thursday
Certain · Within days
Open Questions
- Will the FOMC meeting minutes signal a pause or further rate hikes?
- How effective will the expanded Treasury buyback operation be in alleviating market pressure?
- Will global central banks continue to participate strongly in future U.S. Treasury auctions?
