US 30-Year Yield Reaches Year-to-Date High After Poor Auction

The US 30-year yield climbed to its highest level so far this year Wednesday after poor demand for an auction of five-year notes, a week before the Treasury is expected to announce a heavier borrowing schedule for the February-to-April period.

The longest-maturity Treasury yield rose more than 5 basis points to nearly 4.42%, its highest level since Dec. 4. Yields across maturities were already higher on the day before the $61 billion auction at 1 p.m. New York time and propelled by stronger-than-expected gauges of economic activity in January.

The S&P Global gauges reinforced the recent trend of resilient economic data eroding confidence in the outlook for Federal Reserve interest-rate cuts starting by mid-year. Traders are pricing in fewer than 100 basis points of cuts by September, down from around 130 basis points earlier this month.

“The risk of the Fed staying ‘higher-for-longer’ has increased,” as a result of the data points, said Michael Franzese, partner in fixed-income trading at MCAP LLC. The auction result is “a possible sign of this.” Fed policy makers end a two-day meeting Jan. 31 and may alter market-implied expectations further.