Tuesday’s $58 billion 3-year note auction opens a three-day supply test: $39 billion of 10-year notes on Wednesday (hours after the FOMC minutes), then $22 billion of 30-year bonds Thursday — $119 billion of coupons against a 10-year note at 5.31 percent, up 3bp on the morning, and a 30-year bond at 5.67 percent.
September’s auctions were mixed — the 3-year drew below-average demand with a 2.43 bid-to-cover against a 2.63 average — and the backdrop has only hardened. The 10-year hit 5.344 percent on Thursday, its highest since 2002, before safe-haven flows pulled it back. The bid-side makeup matters as much as the clearing yield: indirect bidders (a proxy for foreign demand) and the dealer take will show whether the world’s appetite for duration at 5 percent-plus is stabilizing or still fragile. A soft Wednesday 10-year would land minutes after the Fed minutes, and the combination could set the tone for the October 28 FOMC.