The 10-year Treasury yield retreated from a 24-year high after the U.S. government successfully sold $39 billion in 10-year notes on Wednesday, easing concerns about weak demand for government debt.
The 10-year yield peaked at 5.35% earlier in the session, its highest level since 2002, before settling around 5.282% following the auction. The 30-year yield also pulled back from a 24-year high, trading at 5.655%. The government achieved the highest auction yield since 2000 at 5.3%, according to the source.
The auction results signalled strong investor appetite. BMO described the sale as "strong," noting higher than average bidding from non-dealers. Indirect bidders, which include global central banks, claimed 80.3% of the offering, well above the 10-auction average of 72.4%. Direct bidders took 17.1%, slightly below their 18.3% average. Dealers purchased only 2.5%, significantly below the 9.4% mean, suggesting institutional and foreign buyers drove demand.
Yields have climbed sharply amid inflation concerns and rising energy costs. The 10-year has surged 60 basis points since end-of-July, while U.S. crude prices jumped 20% over the same period. The latest New York Fed Survey of Consumer Expectations showed the one-year inflation outlook reached its highest level since May 2023. Selling pressure extends globally, with the 10-year French bond yield rising 12 basis points to 4.876% and the 10-year U.K. Gilt yield jumping 7 basis points to 5.447%.
The Treasury conducted the second of three auctions this week. The government sold $58 billion in 3-year notes Tuesday and plans to sell $22 billion in 30-year bonds Thursday. Treasury also scheduled a larger-than-normal buyback operation Thursday targeting 20-year to 30-year maturities, doubling the typical $4 billion size to at least $4 billion.
The Federal Reserve's September meeting minutes release at 2 p.m. ET Wednesday may offer clues about future monetary policy. The Fed raised interest rates for the first time since 2023 at that meeting.