The US Treasury sold $70 billion in 5-year notes at 5.033% on Wednesday, marking the highest yield since June 2006. The result reflects diminishing demand for government debt, with the bid-to-cover ratio falling to 2.212, the lowest level since December 2018.
Indirect bidders, including foreign central banks, purchased just 54.3% of the auction, down from 61.5% at the previous sale and the lowest share since March 2020. The yield climbed above the 5.002% when-issued level and up significantly from 4.393% at the prior sale in August.
Pressure Across the Curve
Rising yields extended beyond 5-year debt. The 10-year Treasury yield reached 5.12% on Wednesday, its highest level since 2007, while the 30-year touched 5.37%.
Business activity accelerated at its fastest pace since July 2021, according to flash survey data released that morning, adding upward pressure on yields. Federal Reserve governor Michael Barr stated Wednesday that further rate hikes remain necessary to bring down inflation, with traders subsequently pricing in a 70% probability of an October rate increase.
Implications for Bitcoin
Higher long-term yields increase the opportunity cost of holding non-yielding assets such as bitcoin. The asset fell below $84,000 following the strong economic data release that pushed the 10-year yield above 5%.
Bitcoin has increasingly moved in tandem with technology stocks, making it sensitive to shifts in interest rate expectations. The Treasury auction results add to this downward pressure on risk assets.
Global bond yields have surged to multi-decade highs across major economies throughout the year, reflecting a broader trend affecting asset valuations worldwide.
