Summary

  • The U.S. Treasury's auction of 10-year Treasury notes showed weaker investor demand, with the high yield rising above 5% to 5.02%.
  • The bid-to-cover ratio fell to 2.46 from 2.77 at the previous sale, confirming softer demand by the bid-to-cover ratio measure as well.
  • With the U.S. 10-year Treasury yield above 5%, pressure is building on the bond market, borrowing costs, and stock valuations.

Forecast Trend Report by Period

Demand at the U.S. Treasury's 10-year note auction weakened as the high yield topped 5% and the bid-to-cover ratio fell.

Results from the U.S. Treasury's Nov. 10 auction showed that $42 billion of 10-year notes were sold at a high yield of 5.02%. That was 0.01 percentage point above the 5.010% when-issued yield in the market just before the sale.

The bid-to-cover ratio came in at 2.46, down from 2.77 at the previous auction. The ratio measures total bids relative to the amount of securities offered.

The auction tailed by 1 basis point, meaning the high yield came in 1 basis point above the when-issued yield. That indicates investors demanded a higher yield than the market had expected to take down the notes.

With the U.S. 10-year Treasury yield above 5%, pressure is also building on the bond market, borrowing costs and stock valuations.

JH Kim