WHAT YOU NEED TO KNOW
  • The 10 year Treasury yield rose above 5.3% and reached its highest level since 2002.
  • Treasury planned a $39 billion auction of 10 year notes amid concerns about inflation, debt levels and term risk.
  • The 30 year Treasury yield reached a 24 year high, while overseas government bond yields also climbed.
  • The 10 year yield has surged 60 basis points since July’s end as U.S. crude prices gained 20%.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

U.S. Treasury yields climbed Wednesday and returned to territory near multiyear highs as traders prepared for a pivotal sale of 10 year Treasury notes. Rising yields have rattled investors around the world, placing intense attention on demand for the new supply.

The benchmark 10 year Treasury yield rose more than 3 basis points to 5.307%. Earlier in the session, it reached its highest level since 2002, extending the pressure that has recently swept through bond markets.

The 30 year Treasury bond yield advanced more than 4 basis points to 5.684% after reaching a 24 year high earlier. The 2 year Treasury note moved in the opposite direction, with its yield slipping less than 1 basis point to 4.785%.

One basis point equals 0.01%, while bond yields and prices move in opposite directions. That relationship means the recent surge in yields has coincided with selling pressure across the bond market.

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The Treasury plans to auction $39 billion of 10 year notes Wednesday, with results scheduled for release at 1 p.m. ET. The sale will test whether current yields are attractive enough to bring buyers forward or whether investors will demand an even larger premium.

Concerns surrounding inflation, debt levels and term risk are hanging over the auction. Those issues have increased the importance of the sale as traders assess the market’s appetite for more government debt at current yields.

The auction will be the second of three Treasury Department sales during the week. The government sold $58 billion in 3 year notes Tuesday and is scheduled to sell $22 billion of 30 year bonds Thursday.

“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 said in a note at Tuesday’s close.

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“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.

Treasury will also conduct its latest buyback operation Thursday, targeting maturities between 20 years and 30 years. The liquidity support operation will be at least $4 billion, which is double the normal size.

The previous buyback involving that maturity range totaled just over $4 billion. The latest operation arrives as longer maturity Treasury yields remain under heavy pressure and traders confront another round of government securities entering the market.

Bonds have recently been selling off as investors worry about inflation and rising energy prices. The 10 year Treasury yield has surged 60 basis points since the end of July, while U.S. crude prices have soared 20% during the same period.

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Selling pressure has also intensified overseas. The yield on the 10 year French bond jumped 12 basis points to 4.876%, while the 10 year U.K. Gilt yield climbed 7 basis points to 5.447%.

Minutes from the FOMC meeting are scheduled for release at 2 p.m. ET against that unsettled backdrop. Traders will examine the minutes for possible insights into Federal Reserve monetary policy decision making.

At the Fed’s September meeting, policymakers voted to raise interest rates for the first time since 2023. Inflation concerns have also increased after the latest New York Fed Survey of Consumer Expectations showed the one year inflation outlook at its highest level since May 2023.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.