10-year Treasury yield hits highest level since 2002 as traders prepare for key bond selloff

U.S. Treasury yields climbed Wednesday, trading around multi-year highs, as traders prepared for the sell-off of 10-year notes at a time when rising yields have rattled investors around the world.

The reference Cash flow at 10 years was up almost 8 basis points to 5.35% – its highest level since 2002. The Cash flow over 30 years the bond rose 8.3 basis points to 5.724%, also hitting a 24-year high. THE Cash flow over 2 years the note yield increased 2.7 basis points to 4.818%.

One basis point is 0.01%, and yields and prices move in opposite directions.

The Treasury plans to sell $39 billion of 10-year notes in an auction Wednesday that will test whether yields are now attractive enough to attract buyers or whether investors will demand an even greater premium, amid concerns about inflation, debt levels and forward risk. Auction results will be released at 1 p.m. ET.

This will be the second of three Treasury Department sales this week. The government sold $58 billion of 3-year bonds on Tuesday and is expected to sell $22 billion of 30-year bonds on Thursday.

“We were encouraged by the removal of the 3-year auction offering on Tuesday – which stalled slightly but did not come to an end as had been the case in the previous sequence of coupon auctions,” Ian Lyngen, head of BMO’s US rates strategy, said in a note at Tuesday’s close.

“It goes without saying that the 10-year offer (on Wednesday) is much more relevant in setting the tone for US rates. Despite the good reception given to the 3-year offer, we will look for a significant auction concession before the reopening of the 10-year bonds – either outright or on the curve,” the analysts added.

The Treasury will also organize its latest buyback operation on Thursday, targeting maturities of between 20 and 30 years. The liquidity support operation will amount to at least $4 billion, double the normal size. The last buyout in this range was just over $4 billion.

Bonds have sold off recently as investors worry about inflation and rising energy prices. The 10-year yield has jumped 60 basis points since late July, while U.S. crude prices have climbed 20% over that period.

Sales pressure is also increasing abroad. The yield on the 10-year French bond jumped 12 basis points to trade at 4.876%. The yield on the UK 10-year Gilt jumped 7 basis points to 5.447%.

In this context, the minutes of the FOMC meeting will be released at 2 p.m. ET. Traders will analyze them for potential insights into the Fed’s monetary policy decision-making. At the Fed’s September meeting, policymakers voted to raise interest rates for the first time since 2023.

The New York Fed will release its monthly survey of consumer expectations at 11 a.m., which will include one-, three- and five-year inflation prospects.