US bonds rally after 30-year auction finds solid demand

Key Points:

• US Treasury yields fell across most maturities on Thursday, with the 10-year yield dropping 5 basis points to 5.227% after a 24-year high, supported by strong demand in a 30-year bond auction.
• The 30-year auction priced below expectations with a high bid-to-cover ratio of 2.54 and increased foreign investor participation, signaling sustained appetite for long-dated government debt despite market volatility.
• Oil prices influenced Treasury yields, rising sharply due to Middle East supply concerns but easing somewhat after President Trump ruled out a US attack on Iran before the November midterms.
• Fed Governor Christopher Waller indicated further rate hikes may be needed to reduce inflation, which pushed short-term 2-year yields higher, while some analysts believe the peak in Treasury yields and Fed tightening may have already occurred.
• The yield curve flattened as the spread between 2-year and 10-year yields narrowed to 47.1 basis points, reflecting market uncertainty about future interest rate moves amid inflation and geopolitical risks.