U.S. stock-index futures fell Thursday as Treasury yields rebounded, wiping out most of the drop that followed the Treasury Department's plan to expand its bond-buyback program. JPMorgan strategists warned the intervention only masks the deeper deficit problem driving yields higher.
Treasury yields climbed Thursday morning, erasing most of the pullback seen a day earlier after the Treasury Department announced an intervention aimed at easing pressure on longer-dated government debt. The 30-year Treasury yield, the primary focus of the accelerated buyback, rose 5.7 basis points to 5.251%. The 10-year yield moved 5.1 basis points higher to 4.704%. The 2-year yield added 1.5 basis points to 4.1927%.
Buyback plan's effect fades fast
Secretary Scott Bessent announced Wednesday morning that the Treasury Department would at least double the size of its government debt buybacks, starting Sept. 9 and running through Nov. 4. Yields tumbled on the news, with the 30-year falling about 10 basis points after previously touching its highest level in about 19 years. However, the trade quickly unwound as the market digested the move alongside longer-term structural problems in the fixed-income market.
According to CNBC: "belie the underlying structural challenges and do nothing to address them", said Maia Crook, senior research analyst at JPMorgan Chase, in a client note.
Stock futures slip, indices under pressure
U.S. stock-index futures were tumbling as longer-term yields climbed back up. The S&P 500 stood at 7707.98 ahead of the open. The Dow Jones Industrial Average traded at 53463.05 at the same time.
Separately, JPMorgan strategists Jay Barry and Jason Hunter said investors will ultimately demand extra return for holding long-term bonds, known as term premium, pointing to the U.S. running a 6% budget deficit near full employment.
Debt and inflation pressures persist
The rate moves came the same day Treasury updated the national debt total, which pushed past the $40 trillion mark. Record corporate debt issuance tied to the artificial intelligence buildout has added competition for buyers, contributing to rising term premiums. Traders were also digesting July's Federal Open Market Committee minutes, which indicated higher interest rates would likely be needed without more progress on inflation, which remains above the Fed's 2% target.
Sources: CNBC, MarketWatch
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