Treasuries declined as market participants failed to see US government officials directly signal a possible reduction in long-term debt sales, while oil prices rose. The selloff lifted yields across maturities by several basis points. The move accelerated as the price of US benchmark crude oil topped $100 a barrel for the first time in weeks, shortly after midday in New York. At the same time, the Treasury Department released a list of survey questions for primary dealers ahead of its next quarterly borrowing discussion on Nov. 4.
Market participants had expected Treasury Secretary Scott Bessent to ask for views on cutting long-term debt supply or even ending sales of 20-year bonds. Instead, the department asked more generally about future changes to auction sizes in light of "structural changes in investor demand." Blake Gwinn, head of US rates strategy at RBC Capital Markets, said the questions contained no real signal and were likely a net disappointment for those expecting big changes.
Long-term yields edged higher after the questions were published, and 30-year Treasuries cheapened relative to comparable interest-rate swaps. Earlier, Treasuries had benefited from renewed weakness in US technology shares. The government faces rising borrowing needs due to persistent deficits, and interest expense on existing debt has doubled in the past five years. Some analysts argue it can meet those needs by increasing short-term issuance while holding long-term auction sizes steady or reducing them.
Scrutiny of the survey was heightened by the department's efforts to rein in borrowing costs, which reached multiyear highs this month. The department recently expanded buybacks of debt maturing in 10 to 30 years and shifted its guidance from "increases" to "changes" in coupon sales, fueling speculation about cuts. Friday's jump in oil prices, spurred by a congressional challenge to US President Donald Trump on Russian diesel fuel, temporarily restored oil's link to Treasury yields.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing