10-year yield falls after Treasury auction demand is adequate enough to ease investors' fears

Treasury sells $38 billion in 10-year notes
Treasury sells $38 billion in 10-year notes

U.S. Treasury yields dipped slightly on Wednesday after key 10-year Treasury auction data showed enough demand to stave off fears of investors worried about a possible slump in demand for the government's debt and a recent rapid rise in rates.

The yield on the benchmark 10-year Treasury note fell about 2 basis points to 1.518% at around 4:00 p.m. ET. The yield on the 30-year Treasury bond dropped nearly 2 basis points to 2.241%. Yields move inversely to prices (1 basis point equals 0.01%).


The notes auction showed adequate demand for $38 billion in 10-year Treasuries, easing concern among traders that the country's growing debt burden would be too much for the market to bear, hitting bond demand and forcing yields even higher.

The U.S. 10-year yield at the bond auction was 1.523%. The bid-to-cover of 2.38 was slightly below the one year average of 2.42.

"It was a soft auction but not enough to scare people in the aftermath," said John Briggs, head of global strategy at NatWest Markets. "It's not terrible. I think that's what people were worried about."

The Treasury Department has printed roughly $3.6 trillion of new government debt in the past year to shore up the economy that was roiled by the Covid-19 pandemic. Increased supply of government debt and weak demand in a February bond auction has pushed interest rates higher. The U.S. 10-year Treasury yield has flirted with the 1.6% level in recent weeks, pressuring equities.

"I don't think it's enough to move the needle. I would consider it mediocre," Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group, told CNBC. "I think this reflects that long end yields after spiking needed to take a rest."

Earlier on Wednesday, February's consumer price index for February came in in-line with expectations. The Labor Department said on Wednesday its consumer price index increased 0.4% last month after rising 0.3% in January. In the 12 months through February, the CPI gained 1.7%, the largest rise since February 2020, after climbing 1.4% in January.

Concerns about higher inflation have been driving bond yields higher recently.

The $1.9 trillion fiscal stimulus package is expected to add juice to the economy. That has raised inflation concerns, and the market could be spooked by a CPI report that is any hotter than expected.

House Democrats passed the stimulus bill on Wednesday, with President Joe Biden expected to sign it before key unemployment programs expire on Sunday.

CNBC's Patti Domm and Yun Li contributed to this report.