The S&P 500 has pulled back 1.7% this week as long-dated Treasury yields resumed climbing, undoing Treasury Secretary Scott Bessent's plan to steady the bond market with bigger bond buybacks. The yield rout came as the U.S. national debt hit the $40 trillion mark and oil prices rose because of the Iran war.
Yields erase a day's calm
The 10-year Treasury yield jumped 5 basis points to 4.69% on Thursday, giving back Wednesday's retreat after the Treasury Department said it would increase purchases of long-dated government bonds in September. The 30-year Treasury yield has jumped above 5% and hit its highest level since 2007 this week.
According to MarketWatch: George Catrambone, Americas head of fixed income at DWS Group, said of the buyback plan: "It's the equivalent of putting a few sandbags out once the flood has already started"
Yields on the long end briefly pared their gains after Bessent appeared on CNBC Thursday and promised the White House would review spending, but the relief faded and traders again demanded greater compensation for holding long-dated U.S. debt.
Oil and the Iran war add pressure
Brent crude climbed above $93 a barrel on Thursday, up from below $70 in early July, with no end to the Iran conflict, now in its sixth month, in sight. The conflict has pushed up energy and gas prices for U.S. consumers and stoked inflation worries, while the U.S. national debt hit the $40 trillion mark this week.
Some investors are questioning whether to trim bond holdings in favor of gold or bitcoin, both of which have rallied this week.
Stocks give back August gains
The S&P 500 set record highs earlier in August but has pulled back 1.7% this week. The Nasdaq Composite was off 2.5%, and the Dow Jones Industrial Average was 1.7% lower on the week through Thursday, according to FactSet.
Investors are also bracing for a potential $200 billion deluge of new corporate bonds due in September, including issuance from tech "hyperscalers" funding the AI data-center buildout. Bessent said Thursday the Treasury is trying to keep the market in equilibrium as that supply approaches.
Source: MarketWatch
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