But it turned into a complete disaster.

So bad, in fact, that the Federal Reserve had to quietly step in and buy $2.19 billion worth of bonds that private investors didn't want.

When They Don't Want Your Debt

When the US government needs to borrow money, the Treasury Department holds regular auctions where it sells bonds, notes, and bills to investors. It's like eBay, but instead of selling old furniture, the government is selling IOUs backed by the "full faith and credit" of the United States.

These auctions happen on a predictable schedule throughout the year, and they're usually boring affairs that markets barely notice. Investors compete to lend money to the US government, which keeps interest rates low and everyone happy.

The recent 20-year Treasury auction was the opposite of boring.

The bonds had to be priced to yield 5.047%—well above the expected 5.035%. That created what traders call a 1.2 basis point "tail" (basically, the extra yield the government had to offer to get the bonds sold)—the biggest since December. In fact, the government typically paid less than expected (averaging -0.4 basis points) in these 20-year auctions. This recent auction flipped that script entirely—investors basically said "not so fast" and forced Uncle Sam to pay 1.2 basis points more than anticipated.

Even more troubling: the bid-to-cover ratio came in at just 2.46—the lowest since February. In plain English, that means there were only $2.46 in bids for every $1 of bonds offered. That's a clear sign of weak demand if I've ever seen one.

You can see the market's reaction in the 20-year yield—it shot up past 5.1% by the end of the day, the highest level in over a year.

The 30-year bond also pushed well above the psychologically important 5% mark, and the 10-year note surged toward it. These are levels that would have been unthinkable just a few years ago.

Then came the stock selloff. The S&P 500 plunged 80 points in just 30 minutes after the auction results hit trading screens at exactly 1:00 PM ET.

It's no mystery why.

Higher yields mean higher borrowing costs for everyone—governments, businesses, and households alike.