10-Year Treasury Yield Holds at 5.24% Ahead of September CPI

WASHINGTON — The benchmark 10-year Treasury yield ended last week at 5.24 percent, a two-basis-point rise on Friday that leaves it just below the 5.28 percent where it closed on Wednesday. Traders now turn to the September consumer price index, due Wednesday at 8:30 a.m. Eastern time, to decide whether the 10-year can hold above 5 percent.

Key takeaways

• The 10-year yield closed Friday, October 9, at 5.24 percent, up from 5.22 percent on Thursday but below the 5.28 percent close on Wednesday.
• The 2-year yield rose 5 basis points to 4.80 percent, so the 2s10s spread narrowed to 44 basis points from 47.
• The 10-year touched 5.365 percent intraday on Wednesday before closing at 5.28 percent.
• Wednesday’s 10-year auction drew a bid-to-cover ratio of 2.77, and Thursday’s 30-year sale drew 2.54.

A flatter curve says more than the 10-year alone

The 10-year’s two-basis-point move is small. The change in the spread is more informative. With the 2-year climbing from 4.75 percent to 4.80 percent, front-end yields responded more strongly to near-term policy expectations than the long end did, and the 2s10s spread flattened by 3 basis points. A flattening of that kind can reflect traders adjusting to a firmer near-term Fed path while the long end holds steady, which fits the minutes of the Fed’s September meeting. Those minutes, released October 7, show that market-implied rate expectations and Treasury yields had risen in the period since the prior meeting.

The yields quoted are Treasury daily par yield curve rates, based on quotations collected around 3:30 p.m. Eastern time, not prices on individual bonds.

The week’s auctions

TreasuryDirect shows the $39 billion 10-year reopening cleared at 5.300 percent on October 7 with a bid-to-cover ratio of 2.77, the strongest of the last four 10-year sales. A day later a $22 billion 30-year reopening cleared at 5.618 percent with a ratio of 2.54.

The CPI test

The Bureau of Labor Statistics will report September consumer prices on Wednesday, with headline and core measures compared with consensus. A hotter reading would add to the case for further Fed tightening and could push yields above recent highs. A softer one would support bond prices. Energy prices, Treasury supply and risk appetite could also affect trading in either direction.

The week in 10-year closes

The 10-year closed at 5.28 percent on Wednesday, 5.22 percent on Thursday and 5.24 percent on Friday. That is a range of six basis points across three sessions, narrow for a week that included a 5.365 percent intraday high and two large auctions. The compression suggests the market is waiting for information rather than reacting to it, with the CPI report as the next catalyst.

Treasury’s par yield curve rates are interpolated from indicative quotes and give the 10-year a standardized reading each day, which makes them a better basis for comparing sessions than intraday highs. The 5.365 percent peak on Wednesday is therefore a trading reference, while 5.28 percent is the official close for the day.

What to watch

The 5.365 percent intraday high on October 7 is the level traders will reference if CPI surprises on the upside, while the 5.22 percent Thursday close marks the recent low. The 2s10s spread at 44 basis points will show whether the front end or the long end absorbs the data.