Treasury yields touched a 24-year high, and then a US$39 billion bond sale calmed them down

The yield on 10-year Treasury bonds touched about 5.36% on Wednesday, its highest since April 2002. The 30-year yield reached 5.73%, a level last seen in May 2002.

Then the Treasury held its sale, and the buyers came. It sold US$39 billion of 10-year notes at 5.300%, and bids came in at 2.77 times the amount on offer. Peter Boockvar, who writes The Boock Report, said the 24-year highs themselves brought the buyers out.

The 10-year yield finished near 5.28%, barely changed on the day, and the 30-year at 5.66%. Stocks still felt the morning's spike. Banks fell on worries that dearer money slows lending, and the Russell 2000 index of smaller companies dropped 1.31%.

Chart: Treasury yields hit 2002 levels, then buyers came. Closing yields on 10-year and 30-year US Treasuries, in percent, 3 August to 6 October. On Wednesday the 30-year reached 5.73%; a 10-year sale then drew buyers. — This story’s chart of the day: the numbers, the dark version and the animated version are on its own page. The chart’s page →

Minutes of the Fed's September meeting landed at 2pm in New York. Most officials thought another rise in the 3.75–4.00% range would likely be needed by the end of the year.

They disagreed on why. Some want to stop energy prices spreading into everything else. Many described a higher path as insurance in case demand runs hot, and several said current rates are barely restrictive at all.

Our read

the auction mattered more than the minutes. The minutes repeated what the Fed signalled three weeks ago. The auction showed there is still a deep pool of buyers for American debt at 5.3%, and I'd want to see that hold before calling Wednesday's spike the top.

This story ran in A Lender's Market Thursday 8 October’s edition, with the market snapshot, the other two stories, the numbers and the week ahead. Read the whole edition →

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