On Wednesday, the U.S. Department of the Treasury auctioned 10-year Treasury notes with a winning bid rate of 4.066%, a significant surge compared to last month's 3.648%, which was the lowest since May 2023. The pre-auction yield for this sale was 4.062%, 0.4 basis points lower than the final winning bid rate, indicating weak demand as reflected by the tail spread. This is a significant reversal from last month's auction, where the pre-auction yield was 1.4 basis points higher than the winning bid rate. However, the tail spread for this auction was much lower than the 3.1 basis points seen in August, so it's not too bad.

The bid-to-cover ratio for this auction was 2.48, a significant drop from September's 2.64 and below the average of 2.50 for the last six auctions.

As an indicator of domestic demand in the United States, direct bidders, including hedge funds, pension funds, mutual funds, insurance companies, banks, government agencies, and individuals, received only 8.4% of the allocation, the lowest since November 2018.

As an indicator of overseas demand, indirect bidders, typically institutions such as foreign central banks participating through primary dealers or brokers, received 77.6% of the allocation, up from last month's 76.1%, and just slightly below the historical high set in February 2023, when the allocation was nearly 80%.

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As the "catcher" taking up all the un-purchased supply, primary dealers received an allocation of 13.9% in this round.

Financial blog Zerohedge commented that yesterday's 3-year Treasury auction ended dismally, as confidence in the Federal Reserve's easing plans has been severely shaken in recent weeks, causing a surge in Treasury yields and a plummet in foreign demand. However, this 10-year Treasury auction was peculiar, with overseas demand being strong, even near the highest level in history, but other indicators of this auction were not good.

Before the results of the 10-year Treasury auction were announced, the yield on Treasury notes of that maturity rose to an intraday high of 4.07%. After the auction results were announced, the yield on 10-year Treasury notes remained largely unchanged. Meanwhile, U.S. stocks continued to rise, with the S&P 500 index setting a new historical high on Wednesday.