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For a day, at least, the seemingly inexorable climb in Treasury yields stopped. The yield on the 10-year Treasury, which is up 23 basis points in the last month, dropped back to 1.13%, a retreat of 2 basis points. (It takes 100 basis points to make up one percentage point.)

The occasion of the retreat in yields was the U.S. Treasury’s monthly 10-year note auction today, January 12. The auction saw strong demand at 1.164%, nearly one basis point lower than the 1.172% when-issued yield on the 10-year notes in trading at 1 p.m. in New York just before the bidding deadline. That drop in yield is a sign that demand exceeded bond dealers’ expectations. By mid-afternoon the yield had fallen to 1.14%.

The $38 billion auction was the second of the 10-year note that matures in November 2030. The issue debuted at 0.96% and ended 2020 trading at 0.913%. Just before the auction the yield had touched 1.1855%. That’s within 10 basis points of the 10-year Treasury’s high yield back in March.

Bond yields have been climbing since Democrats won control of the Senate with last week’s victory in two Senate races in Georgia–on the theory that the Biden administration will up spending to stimulate the economy–and on remarks from Federal Reserve officials showing a willingness to consider slowing the central bank’s purchases of Treasuries.

Wednesday the Treasury will auction off $24 billion in 30-year Treasury bonds. The yield on the long bond remains around 24 basis points higher from the end of December.

All this is important to those of us who see rising interest rates and a Federal Reserve retreat from bond buying as the big dangers to the continuation of the stock market rally.