Strong demand at a $39 billion auction pushed the 10-year yield lower.
Why it matters: Treasury yields influence borrowing costs for mortgages, corporate debt and municipal financing, as well as equity valuations. The auction offered a positive but temporary signal ahead of more long-term debt sales.
- The 10-year yield reached 5.36% on October 7, its highest level since 2002, before easing to about 5.28%.
- Investors submitted $108.069 billion in tenders for $39 billion of notes, producing a 2.77 bid-to-cover ratio.
- Indirect bidders received about 80.3% of competitive awards, while primary dealers received about 2.5%.
- The Treasury was scheduled to reopen 30-year bonds on October 8.
The U.S. Treasury sold $39 billion of a 9-year, 10-month reopening of its 10-year note on October 7, with the securities maturing August 15, 2036. The notes carried a 4.625% coupon and cleared at a 5.300% high yield, according to the Treasury's auction results.
The sale drew $108.069 billion in competitive and noncompetitive tenders. Its 2.77 bid-to-cover ratio and a stop-through of about 1.7 basis points versus the prevailing when-issued yield indicated that buyers accepted a slightly lower yield than the pre-auction market level, Trading Economics reported.
Indirect bidders received $31.063 billion, or roughly 80.3% of competitive awards. Direct bidders received $6.618 billion, while primary dealers received $984 million, or about 2.5%. The Treasury data do not identify the ultimate investors in the indirect category, so the result does not establish that foreign governments were the buyers.
The 10-year yield had risen as high as 5.36% during the session, its highest level since 2002, before easing to about 5.28% after the auction, according to The Associated Press.
The Federal Reserve's September meeting minutes said longer-term yields had risen partly because of stronger economic data, expected borrowing for artificial-intelligence infrastructure and geopolitical developments. The minutes also said borrowing costs had increased moderately in most sectors and that residential mortgage financing had become somewhat restrictive.
The auction was a temporary relief, not proof that demand concerns had disappeared. The next test was the Treasury's scheduled October 8 reopening of 30-year bonds, according to its auction calendar.
By the numbers
- $39 billion - face amount of 10-year notes auctioned
- 5.300% - auction high yield
- 2.77 - bid-to-cover ratio
Yes, but: The auction improved sentiment briefly, but the note still cleared above 5.3%, and broader pressure on long-term yields also reflects inflation concerns, expected borrowing and other market forces.
What's next: The Treasury was scheduled to reopen 30-year bonds on October 8, followed by additional note auctions later in October.