The S&P 500, Dow and Nasdaq opened higher on Tuesday after the US Treasury said it would at least double its buybacks of longer-term bonds, sending the 10-year yield lower and giving equities relief after a four-day losing streak. The relief faded within a day: by August 20 and 21, yields climbed back toward 4.7% and the S&P 500 and Dow gave back their gains.
All three major US indices opened in the green on Tuesday as a cooling Treasury selloff gave equity markets room to breathe. The S&P 500 climbed roughly 0.2% to around 7,708, the Dow Jones Industrial Average added about 120 points to reach approximately 53,463, and the Nasdaq followed suit with modest gains.
Treasury doubles down on bond buybacks
The US Treasury Department announced plans to at least double its buybacks of longer-term Treasury bonds, scaling up from $2B to a minimum of $4B per operation starting September 9. The move sent the 10-year Treasury yield sliding from 4.71% to 4.64%, a drop equity investors welcomed after a four-day losing streak.
That announcement targets longer-dated nominal sectors, the corner of the bond market under the most strain. Rising yields there had been acting like a slow tax on mortgage rates and corporate borrowing costs, dragging down stock valuations. The buyback expansion comes after the S&P 500 hit an all-time high the previous week before sliding into a four-session losing streak.
Why the relief might not last
By August 20 and 21, the 10-year yield climbed back toward 4.7%, erasing the post-announcement drop. The S&P 500 fell approximately 0.9% over the same span. The Dow gave back around 1.3%.
Rising oil prices, persistent inflation expectations, and expanding budget deficits have kept bond yields from staying suppressed for long. Geopolitical tensions tied to Iran have added further uncertainty, with higher crude prices feeding directly into inflation numbers. Analysts have characterized the buyback strategy as a short-term measure rather than a solution to the economy's structural challenges.
Earnings offer a counterweight
Strong corporate earnings have provided some counterbalance to the macro headwinds, with several major companies posting results that beat expectations. Yet when Treasury yields rise, they mechanically reduce the present value of future corporate cash flows, meaning stocks can lose value even as the underlying businesses keep performing.
Source: Crypto Briefing
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