Traders Are Bracing for a Key Bond Sale. Yields Hit a New Multi-Decade High.

Treasury yields climbed again on Wednesday, hitting a new multi-decade high as traders brace for a key bond sale.

The benchmark 10-year Treasury gained almost 8 basis points during the session and hit 5.35%, the highest level since 2002. The 30-year note climbed further, also reaching the highest since the mentioned year.

The Treasury is set to sell $39 billion worth of 10-year bonds on Wednesday, a new test for U.S. bonds.

Hedge Funds could be a presence in the sale. They are now holding a record share of marketable government debt, with long cash Treasury holdings reaching about $2 trillion at the end of 2025, nearly three times the amount held five years earlier, according to the Office of Financial Research.

Marketable Treasury debt increased 29% over the same period to $28.9 trillion, leaving hedge funds with a record 7% share of the cash Treasury market.

The shift has continued as Treasury borrowing has expanded. Federal Reserve data released Sept. 11 showed domestic hedge funds remained net buyers during the first two quarters of 2026. Net acquisitions of Treasury securities were running at a seasonally adjusted annual rate of $26.4 billion in the first quarter and $60.6 billion in the second.

That growing presence comes with a distinction from some of the traditional investors in government bonds. Pension funds and insurers often buy longer-term bonds to match liabilities extending years or decades into the future. Hedge funds are more likely to trade around price differences and market movements rather than simply hold securities until maturity.

The OECD said in its 2026 Global Debt Report that structural changes in pension systems have reduced demand for long-dated bonds in some markets. The gradual migration from defined-benefit pensions to defined-contribution plans has reduced the need for some funds to match long-term liabilities with long-duration government securities.

France is also facing uncertainty in its bond market. In fact, International Monetary Fund Kristalina Georgieva called on Paris to get its finances under control on Wednesday.

"What we see in France is a complication of, on one side, the consequence of borrowing shock after shock after shock, climbing on this staircase that does not lead to heaven, and on the other side, a political dynamic scene in France that creates more difficulties for the finance ministry to put a clear path for tightening," she told CNBC.

Georgieva was making reference to protests engulfing the country, in which student protests have escalated into clashes and mass arrests.

The protests began late last month in the Paris region before spreading across the country, with students raising concerns about teacher shortages, class sizes, long school days and the condition of school buildings. Hundreds of schools have been affected by blockades and closures as demonstrations continued into October.

The unrest is unfolding as Prime Minister Sébastien Lecornu's government begins negotiations over its 2027 budget, which calls for a fiscal adjustment worth €54 billion.

The plan includes €43 billion in new measures and €11 billion from previously adopted measures that will have a larger impact next year, according to the French government. Paris is targeting a public deficit of 5% of gross domestic product in 2027, or 4.8% excluding additional defense spending.

The government said much of the adjustment would come from tighter control of spending. Primary public expenditure, which excludes debt-servicing costs, is expected to remain flat in volume terms, while spending excluding both debt costs and defense would decline.