Treasury yields rise as oil moves higher, traders await key U.S. bond sale

U.S. Treasury yields climbed Wednesday after retreating in the previous session, as oil prices moved higher. Investors also awaited a closely watched 10-year note auction and minutes from the Federal Reserve's last meeting.

The benchmark 10-year Treasury was up 6 basis points to 5.322%, and the 30-year Treasury bond rose 6 basis points to 5.703%. The 2-year Treasury note yield was up 1 basis point to 4.806%.

One basis point equals 0.01%, and yields and prices move in opposite directions.

Brent crude moved more than 1% higher to $101.73 per barrel. West Texas Intermediate futures climbed 0.5% to $89.86.

Investors are anticipating two key events on Wednesday. FOMC meeting minutes, due 2 p.m. ET, will be parsed 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.

Bond yields have been selling off over the past six weeks as investors were concerned about inflation and rising energy prices.

Traders are now pricing in a 78% chance that the Fed will keep rates unchanged at its next meeting, according to the CME Group's FedWatch tool.

The Treasury also plans to sell $39 billion of 10-year notes in an auction on Wednesday that will test whether yields are now attractive enough to draw buyers or investors will demand an even bigger premium, amid concerns about inflation, debt levels and term risk.

"We were encouraged by the takedown of Tuesday's 3-year auction supply – which stopped through slightly but didn't tail as had been the previous streak for coupon auctions," BMO's Head of U.S. Rates Strategy Ian Lyngen and other analysts said in a note at Tuesday's close.

"It goes without saying that [Wednesday's] 10-year supply is far more relevant for setting the tone in US rates. Notwithstanding the solid reception to the 3-year supply, we'll look for an auction concession of significance ahead of the reopening of 10s – either outright or on the curve," the analysts added.

Bonds overseas sold off as well. 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%.