1 week ago
US Treasury yields rise again after Bessent’s debt-buyback intervention
The US government announced that it would buy back more of its older debt.
This initially made investors less worried, so long-term borrowing costs fell.
On Thursday, however, those costs rose again.
The 30-year Treasury yield increased to 5.251%.
Investors are concerned because the national debt is above $40 trillion.
Companies borrowing heavily for artificial intelligence projects are also competing for investors’ money.
The Federal Reserve has warned that interest rates may need to stay higher if inflation does not improve.
These concerns are pushing up the extra return investors want for holding long-term government debt.
Treasury yields rose Thursday, reversing most of Wednesday’s decline after the buyback announcement.
Scott Bessent said the Treasury would at least double government-debt buybacks from September 9 through November 4.
The 30-year yield rose 5.7 basis points to 5.251%, while the 10-year reached 4.704%.
The 2-year yield increased 1.5 basis points to 4.1927%; one basis point equals 0.01%.
High national debt, corporate borrowing linked to artificial intelligence, and the Federal Reserve’s inflation concerns are pressuring yields.
- Who
- The US Treasury, Secretary Scott Bessent, investors, and Federal Reserve officials.
- What
- Treasury yields rose after initially falling in response to an expansion of government-debt buybacks.
- Where
- The US Treasury and government bond market.
- When
- Thursday, August 20; the buybacks are scheduled to begin September 9 and run through November 4.
- Why
- Investors are weighing the buyback plan against high national debt, corporate debt issuance, higher term premiums, and possible Federal Reserve rate concerns.
Treasury intervention view
Market-pressure view
Effect of the buyback announcement
Treasury intervention view
The Treasury’s expanded buybacks were intended to ease pressure on longer-dated government debt and initially pushed yields lower.
Market-pressure view
The initial decline quickly reversed as investors assessed the plan and broader, longer-term pressures in the bond market.
Main cause of elevated yields
Treasury intervention view
A larger buyback program could provide support for the long-term Treasury market, particularly the 30-year bond.
Market-pressure view
High national debt, record corporate debt issuance linked to artificial intelligence, and higher term premiums continue to pressure yields.
Federal Reserve policy
Treasury intervention view
Further progress on inflation could reduce the need for higher interest rates and ease pressure on bonds.
Market-pressure view
Federal Reserve officials indicated that rates could need to rise if inflation progress stalls, increasing the risk of continued yield pressure.
Key facts
- 30-year Treasury yield
- 5.251%, up 5.7 basis points Thursday
- 10-year Treasury yield
- 4.704%, up 5.1 basis points
- 2-year Treasury yield
- 4.1927%, up 1.5 basis points
- Buyback plan
- The Treasury will at least double government-debt buybacks
- Buyback period
- September 9 through November 4
- National debt
- More than $40 trillion
- Federal Reserve inflation target
- 2%
Sources
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