The auction results for the 10-year US Treasury bonds were poor, with yields reaching their highest level since 2007.

The latest 10-year Treasury bond auction by the U.S. government resulted in a record-high yield of 4.68% since 2007, thanks to recent economic data indicating a reduced likelihood of further interest rate cuts by the Federal Reserve before mid-year. The auction had a size of $39 billion, with the yield slightly higher than market expectations at 1 pm EST. Yields on Treasury bonds of all maturities rose by a few basis points after better-than-expected service activity and job vacancy data. Tracy Chen, portfolio manager at Brandywine Global Investment Management, stated that these data "reinforce the market's view of a strong U.S. economy and interest rates not posing a significant constraint on the economy." Previously, traders were fully expecting the Fed to cut rates again before March next year, but now it may be delayed until the second half of this year. Ahead of the release of December employment data on Friday, November JOLTS job openings unexpectedly increased, and the December ISM services index also exceeded expectations. Indicators related to business price payments have surged to their highest level since 2023. Michael Cloherty, head of U.S. rate strategy at Credit Suisse Securities, noted, "Concerns about persistent inflation risks continue to drive term premiums higher. Additionally, worries about funding needs for budget deficits, as well as the shift in expectations from a hard landing for the economy last year to a soft landing or even no landing, have also impacted interest rate trends." Although the 10-year Treasury yield briefly approached 5% by the end of 2023, the auction result this time marked the highest yield for new 10-year Treasury bonds issued since August 2007. After the COVID-19 pandemic, the auction yield for 10-year Treasury bonds even dropped below 1% multiple times. It is expected that Wednesday's 30-year Treasury auction may also result in the highest yield since 2007. The 10-year Treasury yield has risen from below 4.2% a month ago to the current level, reflecting signs of economic resilience and sticky inflation, as well as the growth in funding demand following three rate cuts last year. This trend is consistent with global markets, for example, the 30-year UK Treasury yield rose to its highest level since 1998 on Tuesday. The additional issuance of the 10-year Treasury bond increased the number of bonds issued in November with a face value of 4.25%. Currently, the highest face value for 10-year Treasury bonds is 4.5%. However, the auction result indicates that the new 10-year Treasury bond to be issued in February may set the highest fixed interest rate in nearly 20 years.