10-year Treasury yield falls from 24-year high after solid bond auction eases demand fears

U.S. Treasury yields came off their highs after a solid sale of 10-year notes. Earlier, the 10-year yield rose to its highest level in more than two decades.

The 10-year Treasury last traded around 1 basis point higher at 5.282%. Earlier in the session, it reached 5.35%, its highest level since 2002. The 30-year Treasury bond yield also traded below a 24-year high, at 5.655%.

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

The Treasury sold $39 billion of 10-year notes in an auction on Wednesday. According to BMO, the sale was “strong”, with higher than average bidding from non-dealers.

Indirect bidders, which include global central banks, took 80.3% of the auction — above a 10-auction average of 72.4%. Direct bidders, scooped up 17.1% of the sale, just below an average of 18.3%. Dealers, meanwhile, bought just 2.5% of the notes offered, well below a 9.4% mean.

“The 24-year highs in rates brought out the buyers and resulted in a great auction,” said Peter Boockvar, market strategist and author of The Boock Report.

Nonetheless, it still was the highest auction yield since 2000 at 5.3%.

This was the second of three Treasury Department sales this week. The government sold $58 billion in 3-year notes on Tuesday and is scheduled to sell $22 billion 30-year bonds on Thursday.

Treasury also will stage its latest buyback operation on Thursday, when it will be targeting maturities between 20 years and 30 years. The liquidity support operation will be at least $4 billion, or double the normal size. The last buyback in that range came to just over $4 billion.

Bonds have been selling off recently with investors concerned about inflation and rising energy prices. The 10-year has surged 60 basis points since the end of July, , while U.S. crude prices have soared 20% in that time.

Selling pressure is also picking up overseas. 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%.

Against that backdrop, FOMC meeting minutes will be released at 2 p.m. ET. Traders will parse them 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.

This comes amid rising inflation fears, as the latest New York Fed’s Survey of Consumer Expectations showed that the one-year inflation outlook jumped to its highest level since May 2023.