Treasuries sharp selloff highlights weak auction, fresh inflation concerns

Investors are likely to pay close attention to buyback news on Thursday. The Treasury said it would purchase up to $6 billion in 20- and 30-year bonds in its buyback operation on Thursday. So far, long-term yields have continued to climb despite the intervention, which the government said is aimed at addressing liquidity in the Treasury market. Late on Wednesday, the yield on the benchmark U.S. 10-year Treasury note US10YT=RR was up 14.1 basis points at 5.108%. It earlier hit 5.135%. Mounting inflation pressures and a strengthening economy are pushing markets to predict a Federal Reserve interest-rate hike ahead of the national midterm elections, with traders on Wednesday adding to bets on a second straight policy tightening in late October. The Fed raised rates last week for the first time since 2023 in an effort to combat persistent inflation. US business activity raced to a more than five-year high in September, fueled by a surge in new orders, though strong demand strained supply chains and pushed prices higher, according to S&P Global data. Traders now see a more than 66% chance of another increase when the US central bank next meets in October, according to CME Group's FedWatch Tool. That expectation was 53% before the release on Wednesday of S&P Global's flash US Composite PMI Output Index for September. "We had strong macro data. I think that's what's pushing yields up and also oil prices are higher. The data indicates a stronger economy," which would add to concerns about inflation, said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. Two-year Treasury yields hit their highest level since May 2024, while a closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=TWEB reached 16.9 basis points, its flattest since February 2025. A steeper curve is widely understood to be more supportive of economic activity by bolstering bank profits and for other reasons. A jump in oil prices added to investors' worries about inflation. Traders evaluated Iranian President Masoud Pezeshkian's vow never to surrender, a day after US President Donald Trump told the United Nations he could "annihilate" Iran. Will Compernolle, macro strategist at FHN Financial, said the day's jump in yields “started with the S&P PMIs; they're painting a picture of the economy not just being resilient, but overheating, and in that sense, robust economic growth is no longer balanced, it's adding to inflationary pressures.” Treasury yields extended their rise in afternoon trading after a $70 billion auction of five-year notes drew weak demand, with the notes pricing at 5.033%, above the market yield at the bidding deadline, indicating investors required additional compensation to absorb the debt. Other measures of demand also disappointed. The bid-to-cover ratio, a gauge of investor appetite, fell to the lowest in four years. "The auction was weak," wrote Peter Boockvar, chief investment officer at One Point BFG Wealth Partners. Investors also digested comments from Fed Governor Michael Barr that the US central bank took an important step last week to "recalibrate" short-term borrowing costs to bring down inflation, and will likely need to deliver further interest rate hikes. In addition, Fed Bank of Chicago President Austan Goolsbee said he believes the US central bank may need to treat the current energy shock as a source of persistent inflation rather than expect it to dissipate on its own. Treasury prices dropped on Wednesday, pushing yields to their sharpest daily increase since the Liberation Day market rout last year, after a stronger-than-expected purchasing managers' report ignited fresh inflation fears and an auction of five-year notes was poorly received. The yield on the 10-year Treasury rose as much as 16 basis points to its highest since July 2007. Selling continued even after the Treasury Department said it would buy back more long-term securities for the second time this month. Bond prices fall when yields rise. Five- and 30-year yields also reached their highest levels since 2007.

Treasuries sharp selloff highlights weak auction, fresh inflation concerns

Treasury buyback operation in focus

Markets price in more Fed tightening

Weak auction and Fed comments extend the selloff

Yields jump on strong data and inflation worries

Related News

MGM Resorts falls after People Inc withdraws bid

Mercury Systems EVP, CLO and corporate secretary Stuart Kupinsky sells 1,000 shares for $86,520

US lawmakers propose overhaul of China tech review before Trump-Xi talks

AIAI director Eric Affeldt reports purchase of 42,857 common shares worth $150,000

GMEX Robotics Corp To Effect 1-For-9 Share Consolidation Effective Sept 28, 2026