U. S. Treasury yields shot up on Wednesday, marking levels not seen in decades, as investors braced for the sale of 10-year notes. The benchmark 10-year Treasury yield jumped nearly 8 basis points to 5.35%, the highest since 2002. Meanwhile, the 30-year Treasury bond yield rose by 8.3 basis points to 5.724%, reaching a peak that hasn't been touched in 24 years.
Eyes are on the U. S. Treasury as it prepares to auction $39 billion in 10-year notes, a crucial test of whether current yields will entice buyers or if investors will push for higher premiums. This auction is the second in a trio of Treasury Department sales this week, following the $58 billion sale of 3-year notes on Tuesday. Auction results are slated for release at 1 p.m. ET.
Investors are scrutinizing these auctions against a backdrop of inflation worries, high debt levels, and term risk. The recent spike in yields has coincided with a bond sell-off, fueled by anxiety over inflation and climbing energy prices. Since July's end, the 10-year yield has jumped 60 basis points, while U. S. crude prices have surged 20%.
Globally, bond yields are on the rise too. The French 10-year bond yield climbed 12 basis points to 4.876%, and the U. K. 10-year Gilt yield increased by 7 basis points to 5.447%. These shifts underscore the worldwide volatility shaking the bond markets.
Beyond the auction, the Treasury will execute a buyback operation on Thursday, targeting bonds maturing between 20 and 30 years. This liquidity measure, expected to be at least $4 billion, is double the usual size, aiming to stabilize the market.
Investors are also eagerly awaiting the release of the Federal Open Market Committee (FOMC) meeting minutes at 2 p.m. ET. These minutes could offer clues about the Federal Reserve's monetary policy stance. At its September meeting, the Fed raised interest rates, marking a significant policy decision.
Earlier, the New York Fed will release its monthly consumer expectations survey at 11 a.m., shedding light on inflation expectations over the next one, three, and five years.
BMO's Head of U. S. Rates Strategy, Ian Lyngen, remarked on the positive reception of Tuesday's 3-year auction, which did not tail like previous ones. He highlighted the importance of Wednesday's 10-year supply in setting the tone for U. S. rates. Analysts are watching for a significant auction concession ahead of the reopening of 10-year notes.
