Wall Street's primary dealers were nearly sidelined in the latest U.S. Treasury auction, as soaring demand from global investors signals a major shift in the dynamics of the American government debt market.
The U.S. Treasury’s benchmark 10-year note auction on Wednesday, September 10, 2025, has sent a clear message: direct investor demand for U.S. government debt remains robust, even as the traditional gatekeepers of the market, Wall Street’s primary dealers, see their role diminish.
The $39 billion sale of 10-year notes was met with exceptional investor appetite, clearing at a lower-than-anticipated yield of 4.033%. This “stop-through” performance—where the auction’s final yield is lower than the pre-auction trading level is a strong indicator of aggressive bidding and healthy demand. The bid-to-cover ratio, a key metric for gauging investor interest, came in at a solid 2.65, significantly higher than the 2.35 recorded in the previous month’s lackluster auction and well above the six-month average.
However, the most striking takeaway from the auction results was the record-low allocation to primary dealers. These 25 banks, designated by the Federal Reserve to bid in all Treasury auctions, were awarded a mere 4.2% of the offering for their own accounts. This marks the smallest share for primary dealers in a 10-year note auction since the Treasury began publishing bidder data in 2003 and follows a similar record-low allocation for Tuesday’s three-year note auction.
The vast majority of the notes, an impressive 83.1% were snapped up by indirect bidders, a sprawling category that includes foreign central banks, sovereign wealth funds, and large asset managers. This data point is a testament to the continued global demand for U.S. debt and suggests that these “real money” investors are willing to hold the bonds for the long term, rather than flipping them for a quick profit.
The trend of low primary-dealer awards is not a new phenomenon, but Wednesday’s result underscores a multi-year shift in the dynamics of the U.S. Treasury market. For decades, primary dealers were the dominant force, routinely taking down more than 60% of every 10-year note auction prior to 2008.
Experts point to a combination of factors driving this change:
As one veteran primary Treasury dealer trader noted, the risk is that this trend could eventually lead to an auction where dealers are completely shut out, forcing them to buy securities at higher prices in the secondary market to meet their obligations. This could lead to sudden rallies and increased volatility, a prospect that should be a concern for the Treasury and the Federal Reserve.
The strong performance of the 10-year auction provides a positive backdrop for Thursday’s scheduled $22 billion sale of 30-year bonds. While the long end of the yield curve has been a source of anxiety, with a poorly received auction in August showing weak demand, some analysts are hopeful that a more “dovish” tone from the Fed and a recent rally in the long bond could spur stronger interest this time around.
The success of the three- and 10-year note sales this week suggests that a recent sell-off that pushed yields higher has attracted a fresh wave of buyers. Whether that momentum can carry through to the 30-year auction remains to be seen, but the latest data confirms that the U.S. Treasury market’s health is no longer solely dependent on the balance sheets of a few big banks.