The Treasury market’s marquee event on Wednesday is the $40 billion sale of 10-year notes, which will act as a gauge of demand for long-dated debt and is likely help shape the trajectory of yields for the rest of this week.
The 1 p.m. Eastern time auction is part of a total of $112 billion in sales of notes and bonds from Tuesday to Thursday, which are coming after a period of volatility in the government-debt market. Tuesday’s sale of $48 billion in 3-year notes saw results as-expected and Thursday brings a $24 billion sale of 30-year bonds.
Investors remain focused on the government’s large fiscal deficit, even after the Treasury announced a fourth-quarter borrowing need last week that was lower than expected, at $776 billion. Analysts at Denmark-based Saxo Bank said Wednesday’s $40 billion sale of 10-year notes is the largest since 2021 and almost double the size of auctions for this tenor seen over the decade which preceded the Covid-19 pandemic.
“Wednesday holds the potential to be the most meaningful session of the week in the U.S. rates market,” said BMO Capital Markets strategist Ian Lyngen and Ben Jeffery. “Demand for the new 10-year note will set the tone for investors’ understanding of the level of interest in the asset class at the moment, an open question in light of the choppy price action seen during the last several months.”
As of Wednesday morning, 10-
BX:TMUBMUSD10Y
and 30-year yields
BX:TMUBMUSD30Y
were lower, a reflection of continued buying demand ahead of the afternoon auction.
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