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- The 30-year Treasury yield surged to a peak of over 4.80% on Thursday.
- The move higher in yields comes after the recent auction was met with considerably weak demand.
- Dealers picked up over 24% of the issued asset, well above the average 11%.
The 30-year Treasury yield rose steeply on Thursday, spiking by as much as 15 basis points and rising back towards recent highs after steadily retreating in recent weeks.
Though the rate settled at slightly lower levels, it peaked at over 4.80% in Thursday's session. The surge was accompanied by a similar upside in the 10-year Treasury note, which jumped as much as 11 basis points. Yields were also pushed up during the session by hawkish comments from Federal Reserve Chair Jerome Powell, who said on a panel that the central bank was not convinced it had done enough to combat high inflation.
The resurgence in yields was the immediate aftermath of a disappointing auction on Thursday. Stats from the Treasury show primary dealers forced to pick up around 24.7% of the issuance in the latest $24 billion sale of 30-year bonds. That's well above the average 11% that banks tend to purchase when investors retreat.
Weak demand was also made apparent by the bid-to-cover ratio, which measures the gap between the dollar value of bids received and the amount sold. In Thursday's auction, the metric neared its lowest level in almost two years, Trading Economics reported. Added to that, the auction also saw the smallest pool of bidders since 2021.
New government bond issuance last month was already seeing softer demand, though bond traders were recently encouraged by the Treasury Department's surprise decision to limit the sale of long-dated US debt.
However, the slowdown isn't enough to reverse ongoing concerns in the bond market, which fueled a historic sell-off in Treasurys last quarter. That's as traders are less eager to pick up debt amid increasing federal deficits, and are demanding higher compensation to take on the massive oversupply of Treasurys.
The upswing in yields was also exacerbated by commentary from Fed chairman Powell, who reminded markets that the central bank would still implement interest rate hikes if necessary.
The sharp rise in bond yields snapped a winning streak among major US stock indexes.