10-year Treasury yield rises as Fed's Waller says more hikes needed, investors await 30-year auction

The yield on the 10-year Treasury was relatively unchanged on Thursday as traders digested comments from a top Federal Reserve official while awaiting another long-dated bond auction.

The benchmark 10-year Treasury yield was less than 1 basis point lower at 5.273% after reaching its highest level since 2002 in the prior trading day. The 30-year Treasury bond yield was down more than 1 basis point at 5.643% after trading just below a 24-year high on Wednesday. The 2-year Treasury note yield rose more than 3 basis points to 4.802%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

Fed Governor Christopher Waller said on Thursday that more hikes are needed to bring inflation down after around 5-and-a-half years above the central bank's 2% target, but suggested rates did not need to rise immediately.

"The hikes do not need to come at consecutive meetings," Waller told a Central Bank of Turkey forum in Istanbul.

"But they should be in place in an acceptable period of time."

His comments come a day after minutes from the central bank's September meeting officials expect they will raise interest rates again before the end of the year to head off inflation.

Investors expect that the Fed will keep rates on hold at its next meeting on Oct. 28 and pull the trigger on a hike on Dec. 9.

Investors are looking ahead to the third Treasury auction this week, taking place after midday. On Wednesday, the Treasury sold $39 billion of 10-year notes, with global central banks making up over 80% of the auction, above the auction average of 72.4%.

The department sold $58 billion in 3-year notes on Tuesday, and is set to sell $22 billion of 30-year bonds on Thursday.

"The 10-year auction has set the tone for the Treasury market – at least for the moment," BMO Capital Markets' Ian Lyngen said in a note late Wednesday.

"While the magnitude of the selloff between the September reopening and today's auction might typically have been a reason to keep bidders on the sidelines, we take solace from the sponsorship even as it was the highest-yielding 10-year auction since November 2000."

Lyngen added that Thursday's long-bond auction will be "the next barometer of demand for US debt in an environment of global deficit angst."

Investors also digested the latest weekly jobless claims data, which came in below expectations. For the week ended Oct. 3, initial claims stood at 197,000, marking a decrease of 2,000 from the prior period and lower than the 200,000 that economists polled by Dow Jones were calling for.