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Investors snapped up Wednesday’s $22bn 10-year Treasury auction, in a sign that intensifying trade disputes have yet to impact US government debt sales.

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Some analysts had feared that the auction would be under-subscribed due to the large Treasury holdings of foreign investors. China is the largest foreign holder of US Treasuries and could potentially leverage its position as a big Treasuries buyer amid ongoing trade disputes, by reducing its purchases and putting upward pressure on US interest rates.

The auction comes after a weak sale of 3-year Treasuries on Tuesday, as investors backed away from owning shorter-dated debt ahead of important inflation data released on Thursday. Higher inflation numbers could be seen as emboldening the Federal Reserve to raise interest rates more quickly, pushing up the yield on short-dated Treasuries, which move inversely to price.

Such a move would likely continue to reduce the difference between two- and 10-year Treasuries — a key measure of the yield curve. Shorter-dated Treasury yields rising above longer-dated treasury yields is tracked as a signal for recession.

“Bottom line, consider the two auctions this week as a further bet on curve flattening,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “A poor short end auction and a better longer end one. The inflation data has the Fed still hiking rates and a variety of economic and overseas bond influences are affecting the longer end.”

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