Foreign bidders (central banks) stepped up big today for the 10 year Treasury auction (article below), with 'record demand' from foreign buyers. In contrast, recent auctions have had very weak demand. So it looks like the timing of the Trump tariff pause was no coincidence, and there was a 'quid pro quo' going on --> you buy our Treasuries, and we'll pull back on the tariff threat. The US has to somehow sell a massive 6.5 trillion bulge of Treasuries by June, so this is one way to get it done. Now we'll see if the big surge in foreign demand continues tomorrow for the 30 year Treasury auction -
>>> US Treasury 10-year note auction outcome shows strong demand
Indirect bidders, which include foreigners, see record demand
Next up: auction of $22 billion in 30-year bonds
NEW YORK, April 9 (Reuters) - A U.S. Treasury debt auction of $39 billion in benchmark 10-year notes was well received on Wednesday, showing solid investor demand even after a bond market sell-off driven by an escalating trade war between the United States and its major trading partners led by China.
The U.S. Treasury's auction came in better than expected, priced at a high yield of 4.435%, lower than the rate forecast at the bid deadline.
After the auction, the 10-year yield was last at 4.38% , down from 4.466% just before the 1300 EDT auction. That said, the 10-year has risen sharply this week by 37 basis points, on track for itslargest weekly gain since June 2013.
"The 10-year Treasury auction went better than expected certainly against a backdrop where the bond market had been trading very weakly over the course of the last week," said Jeffrey Palma, head of multi-asset solutions and macro research, at Cohen Steers in New York.
"That strong result at least in the short run is a positive for sentiment. The longer-term questions still remain around the impact from tariffs and so forth on growth. But at least for the short run it's a bit of welcome good news against what has been a tough backdrop."
The auction statistics were robust across the board.
The bid-to-cover ratio, another gauge of demand, was 2.67, the highest since December, solidly above the 2.53 average.
Indirect bidders, which include foreign central banks, took up a record 87.9% of the bids, up from 67.4% last month.
Dealer participation was at 10.7%, lower than the 13.1% in the previous month and the 14.5% average. High dealer participation in Treasury auctions suggests lack of interest from other investors, meaning dealers had to step in to absorb the note.
Investors have been worried about the prospect of a major trade conflict, which has sparked worries about demand for what is supposed to be a global safe haven.
Those fears may have eased for now after U.S. President Donald Trump on Wednesday said he would pause many of his new tariffs for 90 days, even as he raised them further on imports from China.
On Tuesday, the U.S. Treasury sold $58 billion in three-year notes and it was poorly received by the market. The note was priced at 3.784%, higher by over 2 bps than what the market indicated, suggesting investors demanded a premium to buy the three-year debt. In bond market parlance, the three-year note auction "tailed".
Last month's 10-year note auction came in within expectations as well, with end-user demand stable. The bid-to-cover ratio, another gauge of demand, was 2.59, the highest since December.
Wells Fargo had earlier pointed out in a research note that 10-year note auctions in April usually tend to be weak.
The last five 10-year reopening auctions had been softer than anticipated, with the largest tail in n 2024 at 3.1 bps. The average tail over the last five years was 1.8 bps, Wells Fargo wrote.
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