The expectations for inflation and fear of accelerated rate hikes on the part of the Fed seem to be driving the stock market correction in the US this February, 2018, and as a result of the jobs report on Friday, February 2.
As a measure of inflation, the 10 year Treasury notes yields are inching higher, close now to 2.9 percent.
I want to ask what is the connection between inflation expectations and the "tepid demand" for Treasuries in the most recent auctions (10 year notes).
Presumably yields at the auctions are perfectly fine-tuned to meet supply and demand. Therefore, if the issue was simply an expectation of higher yields in the near future, this would have been factored in at the time of the auctions.
At this point the fiscal hole of $1 trillion created by the recently enacted tax cuts is already known. Presumably, economists still see US Treasuries as risk free. And there is the "flight-to-safety" effect, which would anticipate investors fleeing the stock market to seek refuge in US Treasuries, and is seemingly absent here...
So what is behind the "tepid demand"? Is it in some way connected to the main issue of inflation concerns at a technical level, or is it a parallel topic (e.g. institutional trust)?
I am not asking for an opinion-based answer, but a beginner's account of the technical connections between these concepts to the extent that this is possible.