The U.S. Treasury sold $35 billion in 10-year notes Wednesday at a high auction yield of 3.613% Wednesday as bidders snapped-up the new paper as the fastest pace in nearly a year, suggesting fixed income investors are becoming less concerned for a near-term inflation surge.
Investors bid $2.66 for every $1 of 10-year notes on offer from the Treasury, auction data indicated, a notably firmer tally than the 2.53 'bid-to-cover' ratio recorded at the last auction on January 11, when the yield was just 3.575%, and the highest since February of last year.
Prices and yields in the bond market move in opposite directions, making today's paper cheaper than it was in early January. Foreign buyers, the data indicated, took down around 79.5% of the sale, up from the 66% figure reported in January and the strongest uptake in more than two decades.
Stocks were little-change in the wake of the auction results, with the Dow Jones Industrial Average marked 78 points lower on the session and the S&P 500 down 32 points.
Benchmark 10-year notes edged higher, to 3.643% in the wake of the auction, while 2-year notes were pegged at 2.446%. The U.S. dollar index was marked 0.13% lower at 103.27 against a basket of its global peers.
The solid auction results amplify comments from Federal Reserve Chairman Jerome Powell yesterday that indicated he was pleased to see disinflation taking root without damaging the domestic job market.
The January jobs report, Powell said, "shows why it will take a significant period of time" to tame domestic inflation, referring to Labor Department data showing 517,000 net new jobs were created over the first month of the year.
"The labor market is incredibly strong ... certainly stronger than anyone expected" he added, indicating the outsized January gain of 517,000 new positions wouldn't necessitate an immediate Fed reaction beyond what has already been telegraphed.
The CME Group's FedWatch suggests a 90.8% chance of a 25 basis point rate hike in March, up from around 81.7% this time last week and just 66.8% a month ago. The odds of a follow-on hike in May were pegged at 68.3% in the wake of the 10-year auction.
