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Treasury Buyback Disappoints, Bond Yields Surge
10 Sep
Summary
- Long-term US Treasury bond yields surged after a $6 billion buyback.
- The 10-year Treasury note yield reached a three-year high.
- Markets expected a larger buyback, leading to disappointment.
Yields on long-term US Treasury bonds experienced a significant surge on Wednesday, with the 10-year Treasury note reaching a three-year high above 4.85 percent. This followed the Treasury Department's announcement of tripling its buyback of long-term bonds to $6 billion, a move intended to calm the bond market as part of a strategy unveiled last month.
Market participants had widely expected a larger buyback, with some insiders anticipating figures of $10 billion or more. The announced $6 billion was considered by commentators to be near the lower end of expectations and insufficient to address the market's concerns. This disappointment, coupled with rising Brent oil prices above $100 a barrel due to escalations in the US-Iran war, contributed to the upward pressure on bond yields.
Critics of the Treasury's buyback plan argue it is a superficial fix for deeper fiscal challenges within the US Treasury market. Some financial experts believe the market is too large to be significantly influenced by such buyback programs, with one analyst calling the effort 'too obvious' and a 'shell game.' The buyback announcement on Wednesday followed a previous plan on August 19 to 'at least double' bond buybacks.
