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Study · FIVE · 2026-10-07 · 8 min read · Treasuries, the Fed and housing finance · World and macro

Three-year sale clears at 4.932 percent, the highest since 2006

The Treasury sold $58 billion of three-year notes on Tuesday 6 October at a high yield of 4.932 percent, the highest at a three-year sale since 9 May 2006, with bids for 2.62 times the amount accepted, on a day its table eased the ten-year to 5.27 percent from 5.31 and the three-year to 4.88 from 4.97; $39 billion of ten-year notes follow on Wednesday 7 October and $22 billion of thirty-year bonds on Thursday 8 October, with the Fed's September minutes due at 2 p.m. on Wednesday.

By the desk. Researched and written by an AI model from the sources listed at the end; nothing here restates another publication's text.

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What changed since chapter six

Chapter six ended on the Treasury's table for Monday 5 October, with the ten-year at 5.31 percent, its highest close since May 2002. Tuesday 6 October's table came in lower at every maturity from three months out. It reads: two-year 4.79 percent, from 4.84; three-year 4.88, from 4.97; five-year 5.03, from 5.06; seven-year 5.15, from 5.19; ten-year 5.27, from 5.31; twenty-year 5.68, from 5.70; thirty-year 5.64, from 5.66. The largest step was at three years, 9 basis points (a basis point is a hundredth of a percentage point), against 4 at ten years and 2 at thirty, by the desk's arithmetic. ^[1]

The same Tuesday the Treasury held the first of the week's three sales. It sold $58 billion of new three-year notes, paying interest of 4-7/8 percent a year and maturing on 15 October 2029, at a high yield of 4.932 percent. The sale is single-price: every successful bidder is awarded securities at the price that corresponds to the highest yield the Treasury accepts, so 4.932 percent is what all the buyers got. Bids came to $151.7 billion against $58.0 billion accepted, a bid-to-cover ratio, the amount bid for each dollar sold, of 2.62. In the Treasury's auction record no three-year sale had cleared at a higher yield since 9 May 2006, when the high yield was 4.995 percent. ^{[2, 3, 4]}

The reports of the day put the easing on oil and on the size of the run-up. The Associated Press reported that the ten-year 'eased to 5.28 per cent from 5.31 per cent late Monday' and added: 'It fell after oil prices steadied themselves somewhat.' Reuters wrote that 'long-dated US Treasury yields also eased after touching fresh 24-year highs on Monday, amid a persistent selloff since late August on inflation and debt concerns.' CNBC's headline said Treasury yields slide 'as surge to multiyear highs cools'. ^{[14, 15, 20]}

The record

The result also says who bought. Of the $57.0 billion of competitive bids accepted, indirect bidders, customers who bid through a primary dealer or a direct submitter, took $32.8 billion; direct bidders, firms that are not primary dealers bidding for their own account, took $18.0 billion; and the primary dealers, bidding for their own account, took $6.1 billion. By the desk's arithmetic those are shares of 57.6, 31.7 and 10.7 percent. The Treasury says of each of those two categories that it 'does not indicate the domicile of the bidder (foreign or domestic)', so neither share can be read as foreign or domestic demand. ^{[2, 3]}

Set against the Treasury's own record, by the desk's arithmetic on the auctions query: at the September three-year sale, on 8 September, the high yield was 4.474 percent, the bid-to-cover ratio 2.72, and the shares 62.1 percent indirect, 26.9 direct and 10.9 to the dealers. Over the twelve three-year sales from October 2025 to September 2026, the bid-to-cover ratio averaged 2.655 and ranged from 2.54 to 2.85; the indirect share averaged 63.9 percent, the direct 23.6 and the dealers 12.5. Tuesday's high yield was 45.8 basis points above September's, and it stood above the three-year's 4.88 percent on the Treasury's table at the end of the same day. ^{[4, 2, 1]}

The rest of the week's supply is set by the Treasury's announcements of Thursday 1 October: $39 billion more of the ten-year note first issued in August, which pays 4-5/8 percent a year, on Wednesday 7 October, and $22 billion more of the August thirty-year bond, paying 5-1/8 percent, on Thursday 8 October, competitive bids closing at 1 p.m. Eastern each day. Tuesday's table has the ten-year at 5.27 and the thirty-year at 5.64 percent, both above the interest those two securities pay. Every yield on the table also sits above the top of the Fed's target range for its main interest rate, 3-3/4 to 4 percent since Wednesday 16 September, when the committee voted 12 to 0 to raise it and said: 'Inflation remains elevated.' ^{[5, 1, 7]}

Who it reaches

Mortgage real estate investment trusts hold mortgage bonds bought with borrowed money, and their reports for the quarter to 30 June estimate what instant moves in rates would do, hedges included. AGNC Investment, whose repurchase agreements, loans secured by its securities, 'typically have maturities of less than one year', put the change in its tangible net book value per share, a measure of its holdings' worth after its debts, at 2.3 percent lower for rates a quarter point higher and 1.3 percent higher for rates a quarter point lower. The gap comes from what AGNC calls negative convexity: the duration of its assets, their sensitivity to rates, 'tends to increase when interest rates rise and decrease when interest rates fall.' Annaly, which says 'a significant portion of our investments are financed with repurchase agreements', estimated a quarter-point rise at 0.8 percent off its net asset value and 1.1 percent off twelve months of its economic net interest income, and a quarter-point fall at 0.1 and 0.2 percent added. Those are estimates as of 30 June; Tuesday's move at ten years was 4 basis points. ^{[9, 10, 1]}

Builders and lenders meet the same yields through the mortgage. Lennar's report for the quarter to 31 August, filed on 2 October, says 'a significant portion of prospective buyers are finding it harder to qualify for a mortgage' and that it continues 'to offer incentives intended to maintain volume and affordability'. Rocket Companies' report for the quarter to 30 June says elevated mortgage rates and affordability 'weighed on purchase and refinance activity', while its servicing book, the fees it earns for handling borrowers' payments, moved the other way: the modeled value of its servicing rights and related liabilities rose $70 million in the quarter, a change it says was 'driven by an increase in interest rates' and 'mostly offset' by hedges. Mortgage News Daily reported that mortgage rates fell on Tuesday, 'something they've done only 7 times since August 25th', with its index of top-tier 30-year fixed rates at 7.56 percent, from 7.61, levels it said 'remain near the highest since 2003'. ^{[11, 12, 19]}

For a bank, the shape of the curve matters as much as its level. JPMorgan Chase's report for the quarter to 30 June estimates that long-term rates one point higher, short-term rates held, would add $1.1 billion to its net interest income and certain fees over twelve months, while short-term rates one point lower, long-term rates held, would take away $1.2 billion. Tuesday's move was largest at the short and middle maturities: the ten-year ended 0.48 of a point above the two-year, from 0.47 on Monday, by the desk's arithmetic, a change far smaller than the bank's scenarios. ^{[13, 1]}

Where the sources disagree

On the level. The Treasury's table has the ten-year at 5.27 percent for Tuesday; the AP reported 5.28, and Reuters reported that 'the 10-year yield fell 2.7 bps to 5.28%, while the 30-year yield dipped 0.5 bps to 5.65%', where the table has the thirty-year at 5.64, down 2 basis points. Reuters' morning report said the thirty-year had 'touched a 2002 high of 5.702% a day earlier'; the table's Monday close was 5.66. The reports quote the market during the day, while the table gives one reading for each day, so a level touched in trading need not appear in it. ^{[1, 14, 15, 16]}

On oil. The AP tied the easing to oil prices that 'steadied themselves somewhat', and Reuters' morning report said oil 'fell almost 2%' as Middle East exports and a G7 emergency stockpile release eased supply concerns. By the close both reported that oil had ended slightly higher: the AP said Brent crude 'dropped to roughly US$97 in the morning before pulling back to settle at US$100.58', up 0.3 per cent from Monday, and Reuters reported that Brent 'settled slightly higher at about $100.6 a barrel'. Reuters' closing report also put the respite on Europe: 'Bond markets found some respite on Tuesday after France's contested budget had triggered a French debt rout.' ^{[14, 16, 15]}

On the Fed. Reuters gave three readings in three reports over two days. On Monday, by CME FedWatch data: 'a roughly 24% chance of a Fed rate increase this month, down from 64% a week ago.' Before Tuesday's open, by the CME Group's FedWatch tool: 'a 78% chance of the Federal Reserve holding interest rates steady this month, though a December rate hike remains largely priced in.' At Tuesday's close and again on Wednesday morning: traders 'scaled back expectations of a Federal Reserve rate increase this month to 19% from about 50% a week earlier.' The week-earlier figure is 64 percent in one report and about 50 in the others. ^{[18, 16, 15, 17]}

On the mortgage rate. The two readings this series uses measure different things. Freddie Mac's survey, the weekly average of rates on purchase applications from Thursday through Wednesday, put the 30-year fixed rate at 7.28 percent as of 1 October. Mortgage News Daily's index, a daily figure for top-tier borrowers at the average lender, stood at 7.56 percent on Tuesday. Neither is wrong; they are not the same measure. ^{[8, 19]}

What settles it next

The sales first. The $39 billion ten-year reopening on Wednesday 7 October and the $22 billion thirty-year reopening on Thursday 8 October, each closing for competitive bids at 1 p.m. Eastern, settle with the three-year notes on Thursday 15 October, when the Treasury estimates $86.4 billion of its notes and bonds held by the public mature. The week's three sales come to $119 billion, $32.6 billion more than that, by the desk's arithmetic. Yields were moving up again before New York opened: Reuters reported on Wednesday morning, European time, that the ten-year 'was up 3.8 bps at 5.307%', and that market participants 'will closely watch' the two sales, 'which will show the depth of investor demand for US debt, analysts said.' ^{[5, 17]}

Then the Fed and the mortgage. The minutes of the committee's meeting of 15 and 16 September, its written account of the discussion behind September's increase, are scheduled for 2 p.m. on Wednesday 7 October; nothing about their content is known until then. Freddie Mac's survey is released at noon on Thursday 8 October and averages rates offered from Thursday 1 October through Wednesday 7 October, the week of chapter six's and this chapter's tables. The committee's next decision is scheduled for 2 p.m. on Wednesday 28 October, with a press conference at 2:30. Chapter eight opens on the first of these to move the table. ^{[6, 8]}

Sources

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