U. S. Treasury yields stabilized from their recent highs after a successful auction of 10-year notes on Wednesday. Earlier in the day, the 10-year yield had surged to 5.35%, its peak since 2002. But it eventually settled at around 5.282%, just a notch higher by 1 basis point. The 30-year Treasury bond yield also eased, trading below its 24-year high at 5.655%.
The Treasury Department's auction of $39 billion in 10-year notes saw strong demand, especially from indirect bidders like global central banks. These bidders snapped up 80.3% of the auction, well above the 10-auction average of 72.4%. Direct bidders accounted for 17.1%, slightly below their average of 18.3%, while dealers took a mere 2.5%, a sharp drop from their usual 9.4% share. Market strategist Peter Boockvar commented that high rates lured buyers, leading to a successful auction, though the yield was the highest since 2000 at 5.3%.
This auction was the second in a trio of Treasury sales scheduled for the week. On Tuesday, the government sold $58 billion in 3-year notes, and it plans to auction $22 billion in 30-year bonds on Thursday. Plus, the Treasury will carry out a buyback operation on Thursday, targeting maturities between 20 and 30 years. Liquidity support is expected to be at least $4 billion, twice the usual size.
In recent weeks, a sell-off in bonds has been driven by investor worries over inflation and rising energy prices. Since late July, the 10-year yield has jumped by 60 basis points, with U. S. crude prices rising by 20%. This selling pressure isn't just in the U. S.; the 10-year French bond yield climbed 12 basis points to 4.876%, and the 10-year U. K. Gilt yield rose 7 basis points to 5.447%.
Amid these market dynamics, the Federal Open Market Committee (FOMC) is set to release its meeting minutes at 2 p.m. ET. Traders are keenly eyeing the minutes for hints about future monetary policy moves. At the Fed's September meeting, policymakers decided to raise interest rates for the first time since 2023, addressing inflation concerns. The latest New York Fed's Survey of Consumer Expectations showed the one-year inflation outlook has reached its highest level since May 2023.
