The US Treasury paid its highest yield on a 5-year note since June 2006, a sign that demand for government debt is weakening even as yields stay elevated across the board.
Rising yields raise borrowing costs across the economy. They also tend to pressure stocks, bonds, and other risk assets as investors demand more compensation for holding debt.
Rising Yield, Dropping Interest
Wednesday’s $70 billion auction priced at 5.033%, above the 5.002% when-issued level, according to Dow Jones. That is up from 4.393% at the prior sale in August.
The bid-to-cover ratio measures how many bids came in for each note sold. It fell to 2.212, the lowest since December 2018.
Indirect bidders, a group that includes foreign central banks, took just 54.3% of the sale. That is down from 61.5% at the last auction and the lowest share since March 2020.
Yields Are Rising Across the Curve
The pressure was not limited to 5-year debt. The 10-year Treasury yield also climbed to 5.12% on Wednesday, its highest level since 2007, while the 30-year touched 5.37%.
CNBC’s Rick Santelli called the 5-year results weak, saying traders had little time to adjust before the sale. Business activity accelerated at its fastest pace since July 2021, according to flash survey data, adding to the pressure on yields that morning.
Federal Reserve governor Michael Barr said Wednesday that further rate hikes are still needed to bring down inflation. Traders have since pushed the odds of an October hike to 70%.
Santelli noted 10-year Treasury yields have averaged roughly 5.5% since 1980. That history suggests current levels are less extreme than they appear. Still, he flagged the next resistance level for 5-year yields near 5.19%.
What It Means for Bitcoin
Higher long-term yields raise the opportunity cost of holding non-yielding assets like bitcoin (BTC). Bitcoin already fell below $84,000 after a separate hot data print pushed the 10-year yield above 5%.
A soft 5-year auction adds to that pressure. Bitcoin has increasingly traded in step with tech stocks, making it sensitive to shifts in the rate outlook.
The sell-off follows a broader pattern of global bond yields surging to multi-decade highs across major economies this year.
Traders will now watch whether yields keep grinding higher across the curve. Santelli still expects the current sell-off to prove temporary rather than the start of a deeper repricing.
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