The yield on the 30-year U.S. Treasury bond fell to 5.61% on Oct. 8 after a $22 billion auction drew 72% of purchases from foreign investors, including central banks and sovereign wealth funds. The decline of nearly 6 basis points followed a prior trading session where the yield had reached 5.73%, the highest level since early 2002. The auction was the third Treasury sale of the week, with the Treasury Department also completing a $6 billion buyback operation to repurchase 20- and 30-year bonds.
On the same day, the yield on the 10-year Treasury bond rose to 5.299%, up more than 2 basis points, after Federal Reserve Governor Christopher Waller indicated that additional interest rate hikes may be needed to address inflation. Waller stated that while hikes do not need to occur at consecutive meetings, they should be implemented within an "acceptable period of time." Investors anticipate the Fed will hold rates steady at its Oct. 28 meeting but expect a hike at the Dec. 9 session. The 10-year yield had previously reached its highest level in over two decades earlier in the week.
The Treasury’s $39 billion auction of 10-year notes on Oct. 7 drew over 80% of bids from global central banks, exceeding the auction average of 72.4%. The prior day’s $58 billion sale of 3-year notes and the Oct. 8 30-year bond auction reflect a pattern of strong foreign demand for U.S. debt, even as long-term yields remain elevated. Market strategists have expressed skepticism about the effectiveness of the Treasury’s ongoing $6 billion buyback program, designed to stabilize yields, with some warning of potential risks if interventions escalate. Dat Tong, senior financial markets strategist at Exness, noted in a note that previous buyback operations have had limited impact on preventing longer-dated yields from rising.
The mixed signals from Treasury auctions and Fed commentary underscore the complex dynamics shaping U.S. debt markets, where foreign investment continues to play a dominant role despite broader concerns about inflation and monetary policy. Analysts suggest the current trajectory of yields reflects both strong demand for safe assets and expectations of continued monetary tightening.