US Treasury yields rise on Wednesday after the United States (US) Treasury Department announces plans to buy back $6 billion of longer-term government debt, three times the size of its usual operation.
The yield on the benchmark 10-year US Treasury note rises to 4.85%, while the 30-year US Treasury bond yield gains to 5.30%. Further along the curve, the 20-year US Treasury yield increases to 5.31%.
The enlarged buyback operation is aimed at supporting liquidity and the smooth functioning of the US government bond market. It follows Treasury Secretary Scott Bessent’s announcement on August 19 that the Treasury would at least double the normal amount of its purchases of previously issued securities.
The latest operation focuses on 10-year and 20-year securities and comes as longer-term borrowing costs remain elevated. The unusually large buyback has also attracted attention as Treasury yields have recently traded around levels not seen since before the 2008 Global Financial Crisis.
Buybacks can support liquidity in older, less actively traded securities and potentially ease some pressure on the bond market. However, yields move higher following Wednesday’s announcement, suggesting that the larger-than-usual operation is not enough to immediately reverse selling pressure on longer-dated US government debt.
Rising Treasury yields provide support to the US Dollar (USD), as higher returns on US fixed-income assets tend to increase their relative attractiveness to investors. The US Dollar Index (DXY) rebounds and erases its earlier losses on Wednesday, returning to flat territory around 98.85 at the time of writing. Meanwhile, rising yields weigh on non-yielding Gold (XAU/USD), which gives back part of its earlier daily gains and trades around $4,391 at the time of press.
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