The auctions of two- and five-year Treasury notes Monday drew the highest yields since before the 2008 financial crisis, reflecting the US bond-market selloff that deepened last week in anticipation of another Federal Reserve rate increase.
(Bloomberg) — The auctions of two- and five-year Treasury notes Monday drew the highest yields since before the 2008 financial crisis, reflecting the US bond-market selloff that deepened last week in anticipation of another Federal Reserve rate increase.
The $45 billion two-year auction at 11:30 a.m. New York time was awarded at 5.024%, eclipsing last month’s result to become the highest since 2006. It will pay interest at a rate of 5%, also the most since that year.
While market yields for existing two-year notes remain slightly below the multiyear high reached during the first week of July, two-year note auctions fall late in the month, so the previous sale results didn’t reflect that peak. Until this month, the highest two-year auction result in 2023 was 4.823% last month.
Monday’s $46 billion five-year auction an hour and a half later drew 4.400%, barely higher than the 4.399% yield in pre-auction trading at the 1 p.m. deadline. It surpassed last September’s as the highest-yielding since 2007.Â
Two-year yields climbed nearly 14 basis points last week, including on Friday after Fed Chair Jerome Powell said the central bank is prepared to raise interest rates further if needed. Treasury yields also have been pushed higher by growth in the supply of new notes and bonds to finance the US government’s widening budget gap.
The previous 10 two-year and five-year auctions were $42 billion and $43 billion respectively. Â
(Adds five-year auction result in first and fourth paragraphs.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.