US Bond Market Cracks Show as 30-Year Treasury Clears Above 5% for First Time Since 2007

The U.S. Treasury sold $125B in new debt across 3-year notes, 10-year notes, and 30-year bonds from May 11-13. The 30-year bond cleared at 5.046%, the highest level since 2007, and the bid-to-cover ratio for the 30-year auction was the weakest at 2.30. Bid-to-cover ratios for all three auctions fell below 2.55, indicating weakening investor appetite for long-dated Treasuries. Rising 30-year yields toward 5.1% threatened to lift mortgage rates and corporate borrowing costs. Auction outcomes occurred alongside hotter-than-expected April CPI and PPI, oil prices above $100 per barrel tied to Middle East tensions, and continued high federal borrowing needs.

"The U.S. Treasury sold $125B in new debt May 11-13, with the 30-year bond clearing at 5.046%, the highest since 2007. Bid-to-cover ratios across all three auctions fell below 2.55, signaling weakening investor appetite for long-dated U.S. debt. Rising 30-year yields toward 5.1% threaten to push mortgage rates and corporate borrowing costs higher in the weeks ahead."

"On May 11, the Treasury sold $58 billion in 3-year notes at a high yield of 3.965%. The bid-to-cover ratio came in at 2.54, with indirect bidders, typically foreign institutions and central banks, absorbing roughly 63% of competitive awards. Market participants flagged the result as soft, requiring a pricing concession to clear."

"The 10-year auction on May 12 drew sharper concern. The Treasury placed $42 billion at a high yield of 4.468%, with a bid-to-cover of 2.40. The auction tailed pre-auction levels by roughly 0.4 basis points or more, meaning buyers demanded a higher yield than traders had priced in beforehand. That outcome pushed the 10-year note yield into the 4.48 to 4.59% range in spot trading after results were published."

"The 30-year auction on May 13 carried the week's most notable signal. The Treasury sold $25 billion at a high yield of 5.046% with a coupon set at 5.000%. That marked the first time since August 2007 that a 30-year bond cleared at or above 5%. The bid-to-cover landed at 2.30, the weakest of the three auctions. The result pushed 30-year yields toward 5.1% in the days following settlement."

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