US 10-year at 4.834%, 'Buying Frenzy'...Has the Bond Market Bottomed Out?

▲ Treasury bonds, interest rates/AI-generated image

The US 10-year Treasury bond confirmed strong investor demand despite the highest auction yield in 19 years.

According to Barron's on September 9 (local time), the U.S. Treasury Department conducted a $39 billion auction of 10-year Treasury bonds. The winning yield was 4.834%, the highest since August 2007.

The higher yields, surprisingly, attracted investors. The bid-to-cover ratio was 2.71 times, exceeding the average of 2.52 times for Treasury bond auctions of the same maturity. This means that for every dollar's worth of Treasury bonds offered, $2.71 in bids were received.

The quality of demand was also strong. Direct and indirect bidders took approximately 96% of the total volume. The proportion of dealers, who typically absorb the remaining volume, was only 4.3%, marking a one-year low.

Long-term Treasury yields are rising amid robust US economic growth, inflation concerns, and increasing government borrowing. US Treasury Secretary Scott Bessent attempted to curb rising interest rates through long-term Treasury buybacks. However, the move to increase the buyback size to $6 billion fell short of market expectations, causing yields to rise again.

The bond market is closely watching the $22 billion 30-year Treasury bond auction, August Producer Price Index (PPI), and Consumer Price Index (CPI). Peter Boockvar, Chief Investment Officer at OnePoint BFG Wealth Partners, commented, “What's needed for long-term bonds are moderate inflation figures and lower oil prices this week,” adding that if these conditions are met, a bond rally and falling yields could follow.

[Article Key Summary]

-The US 10-year Treasury bond auction yield reached 4.834%, the highest since August 2007.

-The bid-to-cover ratio was 2.71 times, surpassing the average of 2.52 times, with direct and indirect bidders taking approximately 96% of the total volume.

-The dealer allocation was 4.3%, a one-year low, confirming strong investor demand despite high yields.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*