Bond buyers abandoned a Friday rally and left the 10-year Treasury yield at 5.28%

From Friday's 5.15% low to the close, the 10-year gave back 13 basis points ^[1]. After the October 2023 touch of 5%, buyers took it down 121 basis points in a little over two months ^[2]. The difference between the two episodes is who kept buying, or rather who stopped. Richter's account is that investors looked past the headlines to a combined private and government payroll gain of 29,000 ^[3]. They also remembered the deficit, the supply of new bonds, debt racing toward $41 trillion, sticky inflation and higher-yielding AI bonds competing for the same money ^[5]. "It was still all hanging over the bond market," Richter wrote ^[6].

That week can be read three ways. Richter's version is that supply and inflation set the floor, and the jobs data only took away the excuse to rally ^[5]. A second reading is that a 21-basis-point range across Thursday and Friday ^[7] shows a market swinging both ways, and one afternoon says little about the next month. The third comes from Richter too: a deep recession would send long yields down hard, and a Fed return to QE would push them lower still ^[12]. I think the evidence supports something narrower than durability. Buyers who chased the yield to 5.15% left once the data looked decent, on one Friday, in a week the 10-year still finished up 11 basis points ^[7]. The case for yields staying above 5% fails the first time a soft payroll report takes the 10-year back under 5%, 28 basis points below Friday's close, and keeps it there ^[7].

By Richter's measure the level is modest. The 10-year has gone from 0.5% to 5.28% since the bond bear market began in August 2020 ^[8], and he puts long yields only at the lower end of the range that held before QE ^[9]. He is easing back into bonds after what he calls 14 years of interest-rate repression ^[15].

The Treasury's September 24 buyback shows what that climb did to paper sold near the bottom. It paid 50.6 cents on the dollar for $1.5 billion face of a 30-year bond auctioned in November 2021 at a 1.94% yield ^[11]. That is about $759 million to retire debt due in 2051 ^[4]. Richter's worked example has a buyer paying $560 for $1,000 of face at that price ^[13]. But 50.6 cents on $1,000 is $506 ^[5]. At $506 the capital gain at maturity is $494, and with $469 of coupons the 25-year return is about $963, against the $909 he gives ^[6].