Treasury yields pulled back on Wednesday from the multi-year highs hit earlier in the week after the Treasury Department said it would double the size of its long-term debt buybacks. The move eased pressure on the long end of the curve even as global bond markets stay under strain from elevated oil prices and inflation fears.
Long-dated yields retreat after buyback boost
The 30-year Treasury bond yield shed nearly 9 basis points to 5.196%, while the 10-year note yield lost 6 basis points to trade at 4.647%. The pullback follows a sharp climb earlier this week that had pushed the 30-year above 5.33%.
Behind the move, the Treasury Department said it will double the size of its government debt repurchases, lending support to longer-dated bonds. Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, said the Treasury is rearranging the maturity schedule rather than paying down debt: "This is NOT a debt paydown, it is just a rearrangement of the maturity schedule" — meaning the Treasury will likely offset the reduced long-end supply with more issuance of shorter-dated bills.
Global yields under pressure
The relief in U.S. long-dated debt comes as yields around the world have been under pressure, in part due to elevated oil prices and fears that inflation could increase. Japan's 10-year bond yield reached its highest level in three decades. German 30-year bund yields hit their highest point since 2011. Rates on France's 30-year bond reached their highest level since 2008.
Deficit and debt costs keep climbing
The U.S. fiscal deficit jumped to $432.3 billion in July, its highest monthly total since March 2021, pushing the year-to-date shortfall to nearly $1.8 trillion. Interest paid to finance the nearly $40 trillion national debt has cost the federal government about $1.2 trillion this year.
Investors now turn to the afternoon release of the latest Federal Open Market Committee meeting minutes. The minutes draw close attention given the sharp divisions within the central bank — at the July meeting, three dissenters voted to hike rates, a split investors will look to understand in greater detail.
Source: CNBC
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