US Treasuries trimmed early losses after a $70 billion auction of new five-year securities lured solid investor demand.

The yield on 10-year benchmark Treasuries was up about three basis points following Wednesday’s sale, after earlier climbing more than five basis points. 

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The shift came as the US government’s offering of five-year notes drew a yield of about 4.071%, slightly below the level seen immediately before the auction. Indirect bidders, a category of investors that includes foreign central banks, took down a record 78% of the debt. 

“It looks like a solid auction,” said Zachary Griffiths, head of investment-grade and macroeconomic strategy at CreditSights Inc. Despite the recent concern about foreign demand for US debt, “it does not appear there has been a mass exodus.”

The five-year auction spotlights a maturity that’s become a sweet spot for many investors because it’s less sensitive to monetary and fiscal policies than its shorter- and longer-dated peers. It follows solid demand for a two-year auction on Tuesday and comes ahead of Thursday’s $44 billion sale of seven-year notes. 

Still, that appetite has yet to clearly extend to longer-term debt, which has been dragging after a string of weaker auctions around the globe. A 40-year auction sale in Japan met the weakest demand since July. 

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Bonds that mature over a longer horizon have been hit as investors grow concerned about widening fiscal deficits in some of the world’s big economies, including the US. 

“It’s hard to argue with the concern over the fiscal policy,” said James Athey, a portfolio manager at Marlborough Investment Management Ltd. “We are likely to oscillate fairly significantly just given the extent of uncertainty and the inflation risks which are still ahead.”

Last week, the US 30-year yield touched 5.15%, its highest since October 2023. The gap between five and 30-year yields has risen above 90 basis points, around its highest since 2021.

On Wednesday, the 30-year yield was higher by about three basis points to 4.98%. 

The question for some on Wall Street now centers on when those lofty yields start to entice some buyers. In the futures market, a block trade targeting a narrower yield gap between 10- and 30-year bonds stood out. 

“Bonds actually look attractive now from a yield perspective,” said Justin Onuekwusi, chief investment officer at St James Place. He added that he expected continued volatility, citing President Donald Trump’s tax bill, trade tariffs and political uncertainty.