US 10-Year Treasury Yield Hits 5.35%, Highest Since 2002, Before Strong $39 Billion Auction Pulls It Back

The 10-year US Treasury yield surged to 5.35% on Wednesday, its highest level since 2002, as a global bond selloff accelerated ahead of a closely watched $39 billion auction of 10-year notes. The 30-year Treasury bond also rose 8.3 basis points to 5.724%, matching a 24-year high, while the 2-year note climbed 2.7 basis points to 4.818%. One year ago, the 10-year yield stood at 3.9%, underscoring the scale of the move.

The selloff was not confined to the United States. Japan's 10-year and 20-year yields hit their highest levels in 30 years, its 30-year yield reached its highest since 1999, and the UK's 20-year and 30-year yields touched levels last seen in 1998. German, French, Spanish, Australian, Canadian, Indian, and South Korean yields across multiple maturities also hit multi-year or multi-decade highs simultaneously, signaling a broad global repricing of sovereign debt.

The $39 billion 10-year note auction cleared at a high yield of 5.300%, the highest auction yield since November 2000, and stopped through the pre-sale when-issued yield of 5.317% by 1.7 basis points, marking the fifth consecutive stop-through. Demand was robust: indirect bidders, a proxy for foreign and institutional investors, took 80.34% of the offering, up from 79.2% at the prior auction, while primary dealers were left holding just 2.54%. The bid-to-cover ratio rose to 2.77 from 2.71 previously. Following the result, the 10-year yield pulled back sharply, falling from around 5.365% to approximately 5.271% within hours. Separately, the US Treasury announced it would buy back up to $6 billion of longer-dated debt on Thursday. Markets were also awaiting the release of FOMC minutes, which were expected to clarify the pace and extent of the Fed's tightening cycle amid softer-than-expected inflation and employment data.