10-year Treasury yield retreats from 2002 high after bond auction

Indirect bidders — including global central banks — absorbed 80.3% of $39 billion note auction

The 10-year U.S. Treasury yield touched 5.35% on Wednesday — its highest level since 2002 — before retreating from that intraday peak after the Treasury Department sold $39 billion of 10-year notes at an auction BMO Bank called “strong.” By the close of trading, the 10-year yield stood at 5.31%, per Federal Reserve data.

The Treasury’s $39 billion auction drew strong demand at multiyear-high yields. The 5.3% sale yield was the highest since 2000, and “the 24-year highs in rates brought out the buyers and resulted in a great auction,” said Peter Boockvar, market strategist and writer of The Boock Report. Indirect bidders — a category that includes global central banks — absorbed 80.3% of the sale, well above the 72.4% ten-auction average.

The 30-year Treasury bond yield traded at 5.66% on Wednesday, below its 24-year high of 5.73% reached earlier in the session, according to CNBC. The 30-year’s intraday peak marked its highest level since April 2002. One basis point equals 0.01%, and yields and prices move in opposite directions on the bond market.

The Treasury sold $39 billion of 10-year notes in Wednesday’s auction. BMO Bank called the sale “strong” and noted higher-than-average bidding. Indirect bidders — a category that includes global central banks — absorbed 80.3% of the auction, above the 72.4% ten-auction average. Direct bidders took 17.1%, just below the 18.3% average. Dealers bought 2.5%, far below the 9.4% historical mean.

Peter Boockvar, a market strategist and writer of The Boock Report, attributed the strong auction to elevated yields attracting buyers. “The 24-year highs in rates brought out the buyers and resulted in a great auction,” Boockvar said. The auction yield of 5.3% was the highest since 2000.

Wednesday’s auction unfolded against a backdrop of rising global bond yields. Bond yields are also higher in Europe, where investors have left the market amid rising government debt and elevated oil prices attributed to wars in Iran and Ukraine.

The 10-year note sale was the second of three Treasury auctions scheduled this week. The Treasury sold $58 billion in 3-year notes on Tuesday and is scheduled to sell $22 billion in 30-year bonds on Thursday.

Treasury will conduct its latest buyback operation on Thursday, targeting maturities between 20 and 30 years. The previous buyback in that range came to just over $4 billion, per CNBC.