Weak Demand for US 10-Year Treasury Notes Drives Yields Higher

The US Treasury’s latest auction of 10-year notes met with lackluster demand, resulting in a significant 'tail' as yields cleared higher than expected. The notes were sold at a yield of 4.177%, surpassing the when-issued level of 4.163%. Participation metrics further highlighted the weakness, with the bid-to-cover ratio falling to 2.39x compared to the refunding average of 2.46x. Indirect bidders, which include foreign central banks, took up only 64.5% of the offering, down from the typical 67.0% norm. This cooling interest follows a robust non-farm payrolls (NFP) report, which has led investors to recalibrate expectations for early Federal Reserve interest rate cuts. The auction results are viewed as bearish for bond prices and have provided upward momentum for the US Dollar against major pairs like EUR/USD.