Did Bessent Call In Favor? Stellar 10Y Auction Prices At Highest Yield Since 2000 On Near Record Foreign Demand

After yesterday's ugly, it stopping through, auction, bond markets were on edge ahead of today's $39 billion reopening of benchmark 10 Year paper: an ugly auction could well send yields to new multi-decade highs (if not vice versa). 

Well, at 1pm we got the results of today's 10Y auction (technically 9 Year, 10 Month reopening) and... they were surprisingly strong. 

Starting at the top: the auction stopped at a high yield of exactly 5.300%, which was almost half a percent higher than the September auction's high yield of 4.8340% and was also the highest 10Y auction yield going back to November 2000, just as the dot com bubble was bursting.

But what the market was more focused on was whether the auction would tail: anything remotely ugly as the 5Y auction two weeks ago and all bets were off. However, not only did the auction not tail, it stopped through the When Issued 5.317% by 1.7bps, the 5th consecutive stop through and the biggest since April 2025! Needless to say, this result raised lots of eyebrows, with many wondering if Bessent called in a favor from one or more "friendly" G7 nations to get a satisfactory result. 

That theory got a second wind when looking at the internals: unlike most recent auctions which saw a sharp drop in foreign (indirect) demand, today we saw a nearly record foreign demand, as Indirects were awarded a whopping 80.3%, the 4th highest ever. And with Directs taking a modest 17.1%, right in line with the 17.0% recent average, Dealers were left holding an amazing 2.5%, the lowest in 10Y history... and easily a flashing red flag that something was very odd in today's auction.

Odd or not, today's auction was remarkably solid for soundbite purposes, and allowed bond markets to exhale...

...  and sending 10Y yields to session lows, down 5bps on the auction itself.

Still, the bounce was short lasting and just like French OATs, the selling resumed promptly after the auction as the bond market - unlike its stock peers - is far less gullible and realizes that while today's auction was always going to go through, absolutely nothing has changed.