Treasury Yields Hit a 24-Year High, Waller Says More Fed Rises Are Coming, and the 30-Year Auction Clears at 5.618%

The bond market spent Wednesday and Thursday being asked to swallow some of the highest borrowing costs in a generation, and it mostly did. Demand turned up at both Treasury auctions, yet yields stayed near levels last seen in 2002, and a Federal Reserve governor made clear that the Fed is not done raising rates.

By Thursday afternoon the 10-year yield had slipped about five basis points to 5.227%, after touching a 24-year high on Wednesday, Reuters reported. The 30-year was at 5.602% and the 2-year at 4.751%.

How strong were the Treasury auctions?

On Wednesday the Treasury sold $39 billion of 10-year notes at a high yield of 5.300%, 1.7 basis points below where the note had been trading beforehand, a sign of eager buyers, according to InvestingLive. The bid-to-cover ratio was 2.77 and indirect bidders, a group that includes foreign investors, took 80.34 percent. TFTC, citing Treasury data, noted that the previous auction in September cleared at 4.834 percent, so the price of ten-year money rose about 47 basis points in 30 days.

On Thursday came $22 billion of 30-year bonds, which priced at 5.618%. Reuters put the bid-to-cover at 2.54, against 2.41 on average over the last six sales, with indirect bidders taking 72.3 percent against a 69.1 percent average. Yields fell after the result: the long bond dropped 5.9 basis points.

What did Waller say about interest rates?

Fed Governor Christopher Waller said further rate rises would likely be needed to bring inflation back to 2 percent, though he sees "flexibility" on the pace, per Reuters. His remarks lifted 2-year yields faster than 10-year yields. The Fed raised rates in September for the first time since July 2023, and Reuters's closing wrap said traders expect no change this month but put the chance of a December increase at 69.2 percent, according to CME FedWatch.