U.S. 10-Year Yield Tests 5% as Corporate Bond and Treasury Auctions Create a Knife-Edge Market

[Financial News] Tensions are rising in the bond market as large-scale Treasury auctions, corporate bond issuance and key inflation data releases are scheduled one after another this week. The 10-year U.S. Treasury note is expected to face a test of whether its yield can break above the 5% level.
On the fourth, local time, the yield on the 10-year U.S. Treasury note, a benchmark for global interest rates, climbed as high as 4.81% during the session after employment data came in stronger than expected for August. It had also risen to 4.82% on the second, its highest level since November 2023.
Padraic Garvey, head of Americas research at ING Group, said in a recent report, "The 10-year U.S. Treasury note is very likely to test 5%."
ING Group presented a return to lower yields around 5% as its base-case scenario, while leaving open the possibility of a temporary overshoot if upward pressure on yields persists.


The 5% level for the 10-year U.S. Treasury note is considered an important psychological threshold in financial markets.
If yields rise above 5%, the relative appeal of risk assets such as stocks could decline, while companies could begin to face significantly higher financing costs.
Mitch Schlesinger, chief investment strategist at Evermay Wealth Management, said that when the 10-year yield reaches around 5%, "companies heavily dependent on borrowing will begin to come under pressure." Market participants are focusing on the series of events scheduled after the Labor Day holiday.
The corporate bond market will first resume full-scale activity on the eighth after the Labor Day holiday.
An informal Bloomberg survey of dealers projected that U.S. investment-grade corporate bond issuance would reach $215 billion this month, setting a record high for September.
The financing needs of major technology companies expanding their investments in artificial intelligence are also cited as a factor driving increased corporate bond supply.


Treasury supply will also continue. The Treasury Department will auction $58 billion of three-year notes on the following day, followed by $39 billion of 10-year notes on the ninth and $22 billion of 30-year bonds on the 10th.
The Treasury Department’s expanded buyback program to support liquidity in the long-term Treasury market will also take effect on the ninth. The maximum size of each long-term buyback will more than double, from $2 billion to $4 billion.
Market participants are also watching how much this measure will cushion the recent sell-off in longer-dated bonds.
Inflation data could also become a key variable in the direction of interest rates.
The U.S. Department of Labor will release the August Producer Price Index (PPI) at 8:30 a.m. on the 10th, followed by the August Consumer Price Index (CPI) at the same time on the 11th.
With expectations for a Fed rate hike in September having risen after last week’s stronger-than-expected employment data, inflation data above forecasts could intensify upward pressure on Treasury yields.
Conversely, if inflation slows and solid demand is confirmed at long-term Treasury auctions, the recent bond sell-off could ease.

[email protected] Lee Seok-woo, International Affairs Specialist Reporter