The new supply: $138 billion of new 10-year Treasury notes replaced $66 billion of matured 10-year Treasury notes.
By Wolf Richter for WOLF STREET.
This week, the government sold $654 billion in Treasury securities spread over 9 auctions, including 10-year Treasury notes and 30-year Treasury bonds.
Of these auction sales, $500 billion were Treasury bills with maturities from 4 weeks to 26 weeks, most of them to replace maturing T-bills.
| Type | Auction date | Billion $ | Auction yield |
| Bills 6-week | Jan-13 | 77.5 | 3.585% |
| Bills 13-week | Jan-12 | 88.8 | 3.570% |
| Bills 17-week | Jan-14 | 69.2 | 3.560% |
| Bills 26-week | Jan-12 | 79.5 | 3.580% |
| Bills 4-week | Jan-15 | 95.3 | 3.595% |
| Bills 8-week | Jan-15 | 90.3 | 3.600% |
| Bills | 500.5 |
And of these $654 billion in auction sales, $154 billion were notes and bonds, including $50 billion in 10-year Treasury notes:
| Notes & Bonds | Auction date | Billion $ | Auction yield |
| Notes 3-year | Jan-12 | 74.9 | 3.609% |
| Notes 10-year | Jan-12 | 50.4 | 4.173% |
| Bonds 30-year | Jan-13 | 28.4 | 4.825% |
| Notes & bonds | 153.6 |
After the 10-year Treasury note sale on Monday at a yield of 4.17%, the 10-year Treasury yield then declined in the secondary market on Tuesday and Wednesday. But on Thursday, yields started taking off again and on Friday jumped to 4.24%, according to Treasury Department data, the highest 10-year Treasury yield since September 2, 2025 – which was three Fed rate cuts ago.
The Fed’s rate cuts have pushed down short-term yields, such as the yields at the T-bill auctions, but long-term yields are set by the bond market and reflect the bond market’s concerns, views, and fears about future inflation, future supply of Treasuries to fund the ballooning deficits, and all kinds of other concerns.
So the Fed cut by 75 basis points, and the bond market just blew it off, steeped in its own concerns (blue line = Effective Federal Funds Rate, or EFFR, which the Fed targets with its policy rates):
The 10-Year Treasury issue: $138 billion replaced $66 billion.
The 10-year Treasury auction this week was the third auction (the second “reopening” auction) in a series of three auctions of the same security with CUSIP number 91282CPJ4, all with the same coupon interest rate (4.0%), and the same maturity date (November 2035). The “yield” was established at each auction via the price.
At the January 12 auction, these 10-year notes were sold at a price of $986.07 per $1,000 of face value, and buyers had to pay $6.74 for two months of accrued interest per $1,000 of face value, giving these notes a yield of 4.173%.
The first auction of this CUSIP issue was held on November 12, 2025. Then this issue was reopened at the December auction when a fresh portion of the security (same CUSIP, same coupon interest, same maturity date) was sold. This week, another fresh portion of the security was sold. Each time, the yield was established at the auction via the price. At the original auction on November 12, 2025, these securities were sold at a price of $993.97 per $1,000 of face value, giving them a yield of 4.074%.
Grouping three months of auctions into one security with the same CUSIP, same coupon interest, and same maturity date – rather than having three different securities – increases the liquidity for trading in the secondary market.
The total issue for this security, all three auctions combined, amounts to $138 billion. The next 10-year note auction on February 11 will start a new cycle of three auctions of securities with a new CUSIP number.
Those $138 billion in securities sold over those three auctions in November, December, and January replaced $66 billion of 10-year notes sold in November and December 2015 and January 2016, with a coupon interest of 2.25%, that matured in November 2025 (CUSIP number 912828M56).
That’s how the amount of 10-year Treasury notes outstanding increases each month, even if the auction size going forward isn’t increased from the current size.
And interest payments will nearly quadruple. The new security (CUSIP 91282CPJ4) was issued with a coupon interest rate of 4.0%. The matured security (CUSIP 912828M56) was issued in 2015 and 2016 with a coupon interest rate of 2.25%.
That math is brutal: Going from $66 billion borrowed 10 years ago at 2.25%, and interest payments of about $1.48 billion per year; to $138 billion borrowed now at 4.0%, and interest payments of about $5.52 billion per year. The interest payments will quadruple!
Shift to T-bills or just jawboning to push down long-term yields?
T-bills outstanding at the end of December dipped to $6.55 trillion, after setting a record at the end of November.
The share of T-bills dipped to 21.6% of all marketable Treasury securities outstanding, exactly where it had been in December 2023.
All this talk by Bessent’s Treasury Department about shifting more issuance to T-bills was one of the many tools with which it attempted to jawbone down long-term Treasury yields. But the shift hasn’t actually occurred yet.
Why? Because total marketable Treasury securities ballooned by nearly the same rate as T-bills ballooned since December 2023: +14.8% for total marketable securities versus +15.4% for T-bills.
The amounts of notes and bonds outstanding ballooned via the mechanism described above with the example of the 10-year notes, where a new issue of $138 billion replaced a maturing issue of $66 billion.
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For a long time some doom and gloom types have said our debt is unsustainable and disaster is ahead. But if there is a strong demand for U.S. treasuries then that won’t happen right?
There will always be enough demand for Treasury securities if the yield is high enough. That’s how yield works.
The question should be this: what will the yield be in the future to create enough demand? For the 10-year: 5%? 6%? Every time the 10-year yield approached 5%, demand exploded and pushed the yield back down.
Can the U.S. experience a sovereign debt crisis? Our government is acting very belligerent against other countries. Even our long term allies. I am afraid this is going to change how other countries and people do business with the U.S. If the world boycotted the U.S. and our treasury bonds then what would happen?
A country cannot have a sovereign debt crisis in debt that it issued in its own currency. Even Argentina never defaulted on its peso debt; it only defaulted on its USD-denominated debt. Greece defaulted because it doesn’t control the euro and cannot print euros. The US doesn’t issue debt in foreign currency.
There may be some kind of crisis, such as inflation taking off, or something else, but not a sovereign debt crisis.
Nimesh,
I think at least two types of “gloom and doom” people exist. Those who look at their personal situation and squeeze longer historical trends into their time window. The 2nd type I wouldn’t even call gloom and doom that recognize certain data points that indicate current debt level is unsustainable and while that in itself matters little it is the impacts that lead to lower quality of life for the majority of Americans. It is possible the US figures out how to solve the significant amount of issues that it faces but I think reasonable to state the US is facing an unprecedented times. Whether that is 20 years, 50 years, or longer, the future is not written, but without a change in trajectory it doesn’t look good. If you call that doom and gloom, so be it, but it also fits the decline of empires narrative very well. More imperialism might work for a bit but hard to see that working long-term in a multipolar world. But of course theoretically the people can simply vote differently and choose priorities our democratically elected officials will implement. Hard not to end with a little sarcasm!