The Treasury will kick-off another $114 billion on bond sales this week with a benchmark 2-year auction later today that will provide a stern test of demand in a weakening market.
Bond markets are bracing for another series of Treasury auctions this week amid one of the biggest market selloffs in nearly two years that has triggered a surge in yields and renewed concerns over the record U.S. deficit.
A combination of faster inflation, a hawkish Federal Reserve, a resilient job market and the prospect of deeper government borrowing to fund record fiscal deficits have all combined to push Treasury yields higher, with 2-year notes last seen changing hands at 5.125% – around 70 basis points higher than at the start of the year – ahead of today's sale.
That puts the demand component in today's auction in sharp focus, following a slump in purchases for the Treasury's benchmark 10-year note sale on October 11 Foreign investors were also reluctant, according to auction data, taking down just 60.3%, down from 66.3% at the prior sale in early September.
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