(Bloomberg) -- The US is poised to sell 10-year Treasuries at a yield below 4% for the first time in a year, after a bond rally in recent days that was fueled by expectations of rapid and large interest-rate cuts from the Federal Reserve.
The Treasury will offer $42 billion on benchmark bonds at 1 p.m. New York time, the first new issuance on the tenor since May, when the notes were sold at 4.483%. The yield on 10-year notes rose four basis points to 3.93% in early European trading.
Bonds rallied sharply earlier this week after a string of weaker-than-expected US data fueled worries the Fed has taken too long to start easing policy. Those concerns compounded a global stock rout and raised questions about company valuations, especially in the tech sector.
Traders in turn reacted by increasing their bets on rate cuts for the year to around 150 basis points, from under 50 basis points a week ago. While pricing has since eased to 100 basis points, the market still sees a 60% chance of a half-point cut in September.
“I think there will be decent demand for US Treasuries today,” said Justin Onuekwusi, chief investment office at St James Place. “Bonds are looking quite attractive given volatile equity markets and the corporate earnings outlook.”
Wednesday’s offering follows a $58 billion three-year note issuance on Tuesday that attracted strong demand and drew a slightly lower-than-expected yield of 3.810%. This week’s US auction cycle also includes a $25 billion 30-year bond sale on Thursday.
The last time the Treasury sold 10-year bonds paying less than 4% was in August 2023 and the lowest yield at an offering this year was 4.024% in January.
--With assistance from Sujata Rao.
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