10-Year Note Rate Climbs to 8.8%--Its Highest in Year

Yields on 10-year Treasury notes rose in Wednesday’s auction to the highest level in a year as the government’s record $30.5-billion refunding cleared its second hurdle.

The average yield was 8.88%, up from 8.59% at the Feb. 7 auction.

It was the highest rate since 10-year notes averaged 9.18% on May 10, 1989. The notes will carry a coupon interest rate of 8.875%, with each $10,000 in face value selling for $9,996.70.

A total of $10 billion in notes was sold out of bids totaling $30 billion.

The refunding winds up today with the auction of $10 billion in 30-year bonds.

It began Tuesday with the sale of $10.57 billion in three-year notes, with an average yield of 8.74%, up from 8.43% at the last three-year auction Feb. 6 and the highest since such notes averaged 9.12% last May 9. Bids totaled $37.3 billion.

This quarter’s refunding is $500 million larger than the last two.

The auction also went well despite slightly disappointing Japanese participation. The Japanese bought 20% to 25% of the issue, slightly below the 30% expected.