Treasury Yields Hit 24-Year Highs Ahead Of $39B 10-Year Note Sale — Danske Reportedly Sees Risk Of 6% As Pressure Builds

Persistent inflation, higher energy prices and heavy borrowing by the government and hyperscalers are pressuring long-dated Treasuries, with the 10-year auction seen as a test of investor demand.

• The 10-year Treasury yield hit 5.361%, and the 30-year reached 5.730%, their highest levels since 2002.
• France's 10-year yield rose 12 basis points to 4.876%, and the U.K. 10-year gilt yield gained 7 basis points to 5.447%.
• A Deutsche Bank poll found 37% of surveyed family offices see rates and yields as the biggest threat to global growth, per Reuters.

U.S. Treasury yields climbed to their highest levels in more than two decades on Wednesday as investors prepared for a $39 billion auction of 10-year notes and weighed persistent inflation, government borrowing and growing corporate financing needs.

The 10-year Treasury yield reached 5.361%, while the 30-year yield climbed to 5.730%, their highest levels since 2002. 

Bond markets have come under pressure as investors weigh persistent inflation and higher energy prices. The 10-year Treasury yield has risen about 60 basis points since the end of July.

The selloff has spread overseas, with France’s 10-year yield rising 12 basis points to 4.876% and the U.K. 10-year gilt yield climbing 7 basis points to 5.447%.

Danske Flags Risk Of 6%

Jens Peter Sorensen, chief analyst at Danske Bank, said in a note cited by the Wall Street Journal that pressure on longer-dated Treasuries is coming from both government issuance and borrowing by hyperscalers.

Sorensen sees a risk that both the 10-year and 30-year yields reach 6% as investors demand greater compensation for holding longer-maturity debt.

Meanwhile, economist Peter Schiff warned on X that the 10-year Treasury yield could soon move above 5.5%, potentially pushing mortgage rates above 8%. He also argued that government-sponsored enterprises backing $7.8 trillion in mortgages could face renewed stress if losses rise.

At the time of this writing, the iShares 7-10 Year Treasury Bond ETF (IEF) was marginally in the red, while the iShares 20+ Year Treasury Bond ETF (TLT) was down 0.47%. 

On Stocktwits, the sentiment around both tickers remained in the ‘bullish’ territory amid high message volume.

Investors See Rates As A Growing Risk

Persistent U.S. inflation, resilient economic activity and fiscal pressures have pushed markets to price a higher path for policy rates. Sticky inflation combined with continued growth could put further upward pressure on yields, according to analysts.

Those concerns are showing up among wealthy investors. A Deutsche Bank poll reported by Reuters found 37% of surveyed family offices viewed rates and yields as the biggest threat to global growth, ahead of inflation at 23% and artificial intelligence (AI) risks at 17%. 

The survey was conducted at a Singapore forum attended by about 200 family offices and wealthy individuals.

What To Watch Next

The Federal Reserve will release minutes from its September meeting at 2 p.m. ET Wednesday. At that meeting, policymakers unanimously raised the federal funds target range by 25 basis points to 3.75%-4%.

The Treasury Department will sell $39 billion of 10-year notes Wednesday, the second of three auctions this week after Tuesday’s $58 billion three-year sale. A $22 billion auction of 30-year bonds is scheduled for Thursday.

The 10-year auction will provide a more immediate test of whether yields above 5% are high enough to pull investors back into longer-dated Treasuries. According to a CNBC report, BMO’s Ian Lyngen said Tuesday’s auction was relatively well received, but the 10-year sale would be more important in setting the tone for U.S. rates.

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