Longer-term U.S.Treasury yields dropped sharply Wednesday after the Treasury Department announced that it would increase the size of its government debt repurchases by “at least double” in a surprise move.The yield on the 30-year Treasury bond plunged from 5.26% to as low as 5.18%.
The 10-year yield, which has a heavy hand in steering consumer borrowing rates, was less impacted by the announcement but still dropped from 4.68% to 4.64%.U.S.
stocks also opened slightly higher.The S&P 500 rose 0.4% and the Nasdaq Composite rose 0.3%.
In effect, the Treasury Department’s announcement means the agency will be stepping in as a larger buyer of longer-term bonds, which have been selling off.Wednesday’s announcement abruptly altered the “tentative buyback schedule” Treasury had released just two weeks ago, an unusual shift.The change will take effect on Sept.
9, the agency said.Earlier this week, the 30-year Treasury yield hit its highest level since 2007, only compounding already soaring interest costs the federal government pays on the massive national debt.When bonds fall, their yields rise.The announcement appears to be the latest effort by the Treasury Department and Secretary Scott Bessent to keep a lid on rates, which have been soaring this year.
Earlier this summer Treasury, along with Japan’s finance ministry, intervened in the sliding Japanese yen.Instead of using dollars to buy yen, the Treasury sold euros and used that money to buy yen.
This move — which reportedly caught the European Central Bank by surprise — may have been intended to dissuade Japan from selling some of the trillions of dollars in U.S.Treasury bonds it holds, further driving up yields.The broader move higher in rates this summer accelerated after Fed chairman Kevin Warsh’s most recent press conference on July 29.The Fed has “a credibility problem,” wrote KPMG chief economist Diane Swonk in an Aug.
11 note.Warsh offered little guidance, causing the bond market ...