US sells 10-year debt at highest yields in nearly 20 years, most since 2007 financial crisis

A $42 billion auction of 10-year US Treasuries resulted in the highest yield for the benchmark securities since 2007, luring decent appetite from investors who’ve been demanding more compensation to finance the US government.The yield at Wednesday’s sale came in at 4.683%, the most since the global financial crisis, and just above the prevailing level seen in the market before the 1 p.m. bidding deadline in New York — a sign that demand only slightly lagged expectations. Most Treasuries ended the day little changed before yields inched lower in Asia on Thursday.It sets the scene for a 30-year sale on Thursday that is expected to take place at the highest financing rate in a quarter of a century. Inflation running above the Federal Reserve’s target and swelling budget deficits are contributing to elevated long-dated yields.“It’s still hard for yields to come down with outsize deficits, growth running solid, the war and inflation running above the Fed’s target,” said Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities.Beyond heavy borrowing, long-end bonds are also grappling with macro pressures. Crude oil’s rebound, driven by tensions in West Asia, threatens to keep inflation sticky and tighten the commodity’s grip on long-dated debt. Meanwhile, robust US growth continues to undermine traditional safe-haven demand for Treasuries, while a heavy slate of corporate bond issuance is forcing sovereign debt to compete harder for investments.The strain is global. Rising Japanese government bond yields on expectations of the Bank of Japan normalising policy are making domestic debt more attractive, draining a crucial source of foreign demand for US Treasuries.That shift has hit investors’ bottom lines. The Bloomberg US Treasury Index ended July with a 1.1% loss, the most since March, before a slight rebound this month.Also Read: Only 8,000 new active clients in July: What NSE data says about India’s broking market

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