Longer-Dated Treasury Yields Rise Despite Bessent's Bond Buyback Increase
FlatRigor 549 sources
The Story
Longer-dated Treasury yields rose this week, with 30-year Treasury yields reaching their highest level since 2007. On August 18, a widespread global selloff of U.S. Treasury securities pushed 30-year yields to roughly 5.34%. Treasury Secretary Scott Bessent responded on Wednesday by doubling bond buybacks from $2 billion to $4 billion, starting next month. This move is a routine operation begun in 2024 to provide a market for longer-dated debt. Bessent insisted the action was not an attempt to tamp down yields. The buyback announcement briefly lowered yields, but they rebounded Thursday and were up again Friday, erasing Wednesday's declines. Investors over the past several days priced in a likelihood of higher inflation, with the breakeven rate, a market-based measure comparing Treasury yields to inflation-protected securities, rising across the curve to its highest level in over two months. The 10-year breakeven rate rose to 2.34% on Thursday, its highest since June 10, and five-year breakevens hit the same level, highest since June 16. Economists worry the Treasury Department’s bond buying could put more pressure on the Federal Reserve to curb inflation. Minutes released this week from the last Federal Open Market Committee meeting stated that risks to the inflation forecast were seen as skewed to the upside, with some participants noting large price increases from artificial intelligence data centers. The Fed voted 9-3 at its last meeting to hold interest rates at 3.5% to 3.75% and meets again on September 15. Fed Chair Kevin Warsh is scheduled to speak at the annual Jackson Hole Symposium next week. Van Hesser, chief strategist at KBRA, a credit and bond rating agency, cited a cocktail of concerns in the market. Oil prices also rose for a second straight week as U.S.-Iran peace talks stalled, and Bessent threatened toughest sanctions in history against Iran. The Dow Jones Industrial Average lost 454 points for the week, the S&P 500 fell 111 points, and the Nasdaq dropped 549 points.
The Spread
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What they agree on
- Longer-dated Treasury yields, including the 30-year Treasury, rose to their highest levels since 2007 this week.
- Treasury Secretary Scott Bessent announced the doubling of bond buybacks from $2 billion to $4 billion starting next month.
- The initial rally in bond prices following Bessent's announcement fizzled, with yields rising again on Thursday and Friday.
- Investors are pricing in a likelihood of higher inflation, as indicated by rising breakeven rates.
Where they split
- Breitbart News attributes the rise in long bond yields to expectations of economic strength, not inflation anxiety, citing stable inflation-protected bond yields.
- Courthouse News Service and CNN emphasize investor worries about inflation, artificial intelligence spending, and the Iran conflict as drivers for rising yields.
- CNBC (article 5) focuses on the breakeven rate as a measure of rising inflation worries, while Breitbart News downplays inflation anxiety.
- The Wall Street Journal and Reuters provide headlines indicating rising bond yields and falling global stocks, without detailed explanations of the underlying causes.
Source Perspectives
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