The U.S. Treasury's 5-year note auction showed weak demand, pushing yields to their highest level since June 2006, a macro signal that is intensifying selling pressure on risk assets, according to market data from Woofun AI. During Wednesday's $70 billion auction, the high yield was set at 5.033%, above the 5.002% when issued, compared to just 4.393% in August.

Data compiled by Woofun AI shows the bid-to-cover ratio fell to 2.212, the lowest since December 2018. Indirect bidders, which include foreign central banks, accounted for 54.3% of the auction, down from 61.5% previously and marking the lowest level since March 2020. The 10-year Treasury yield also climbed to 5.12%, a level not seen since 2007, while the 30-year yield reached 5.37%.

According to analyst Rick Santelli, the weak auction results stem from insufficient adjustment time ahead of the sale, compounded by business activity growth accelerating at its fastest pace since July 2021. Federal Reserve official Michael Barr signaled the need for further rate hikes, pushing the probability of an October increase to 70%. Santelli noted that the average 10-year Treasury yield since 1980 has been around 5.5%, meaning current levels are not extreme, though resistance on the 5-year note could be at 5.19%.

Higher yields raise the opportunity cost of holding non-yielding assets such as Bitcoin. After strong economic data pushed the 10-year Treasury yield above 5%, Bitcoin's price fell below the $84,000 threshold, and the weak 5-year auction further compounded the downward pressure. Bitcoin is now moving in lockstep with technology stocks, making it highly susceptible to fluctuations in interest rate expectations.

The price pullback is not an isolated event but rather a microcosm of the broader macro trend this year in which global bond yields have been hitting multi-decade highs. Market focus has now shifted to whether yields will continue to climb across the entire yield curve. Santelli believes the current decline is a temporary phenomenon rather than the beginning of a deeper repricing process.