(Bloomberg) -- US government debt remained lower on the day as the Treasury’s sale of 10-year notes was met with tepid demand.

The $42 billion of debt was awarded at 4.483%, higher than its 4.473% yield in pre-auction trading at the bidding deadline of 1 p.m. New York time, a sign that demand fell short of expectations. Benchmark Treasury yields of all maturities remained higher on the day by as much as three basis points following the sale.

This week’s Treasury auctions follow a rally that trimmed 10-year yields by more than 20 basis points, depriving investors of a 4.5% interest rate on the new notes that appeared secure as recently as Friday. Also, all but one of the previous six 10-year note auctions drew higher-than-expected yields, and last month’s was historically poor. Wednesday’s result appeared better by comparison.

“‘I would characterize demand as fair at the auction in light of the recent rally,” in Treasuries, said Chris Ahrens, a strategist at Stifel Nicolaus & Co. “The allocations look fairly balanced relative to the prior six-auction averages.”

The 10-year auction followed solid buying interest on Tuesday for Treasury’s sale of $58 billion of three-year securities. This week’s coupon-bearing debt auction cycle will conclude on Thursday with a $25 billion sale of 30-year bonds.

Read More: Treasury 10-Year Auction Tails Despite Firm Bidding Metrics

Other metrics for the sale were better, with primary dealers awarded less than previously and end-user awards higher.

The $42 billion 10-year matched February’s as the largest new issue on record. A new 10-year note comes out once per quarter and is expanded over the following two months via reopenings. 

Except for inflation-protected securities, Treasury auctions during the May-to-July financing quarter, whose sizes were announced last week, are unchanged from the previous period, following a series of increases.

Through Tuesday, the market for 10-year notes saw yields decline for five straight days to about 4.49%, extending their retreat from year-to-date highs over 4.7%. Mounting expectations the Federal Reserve will cut interest rates this year — based on comments last week by Fed Chair Jerome Powell and weak April jobs data — prompted a wave of buying, including short-covering by traders axing bets that benefit from higher yields.

Whether inflation ebbs further, allowing the Fed to begin cutting rates this year, remains top of mind for traders. Next week’s release of April consumer prices may alter the consensus view that at least one cut is likely by year-end.   

--With assistance from Elizabeth Stanton.

(Adds comment and context and updates yield levels.)

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