The 10-year Treasury yield jumped back to 4.71% on Thursday, wiping out its Wednesday retreat and undercutting Treasury Secretary Scott Bessent's debt-buyback plan after just one day. Rising oil prices and a fresh $40 trillion national-debt milestone pushed yields higher, dragging the S&P 500, Dow and Nasdaq lower.
The 10-year Treasury yield jumped 7 basis points to 4.71% on Thursday, giving back its retreat from a day earlier and then some. The reversal came after the Treasury Department said it would increase purchases of long-dated government bonds starting in September.
Buyback plan short-circuited
Bessent's latest effort to control yields on long-dated Treasurys held for barely a day before the market reversed. George Catrambone, Americas head of fixed income at DWS Group, said of the 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, promising the White House would review spending and insisting budget deficits would shrink. However, the Treasury Department declined to comment further, and the easing proved short-lived.
Oil and the Iran war push yields higher
Mike Lorizio, head of U.S. rates and mortgage trading at Manulife Investment Management, said the bigger factor Thursday was the move in oil rather than any rejection of the bigger buybacks. Brent crude rose 2.4% to nearly $94 a barrel, with no end in sight to the Iran war, now in its sixth month.
The conflict has pushed up energy and gas prices for U.S. consumers, stoked inflation worries, and prompted President Donald Trump to ask Congress for billions of dollars to support the war. Lorizio added that higher rates broadly reflect the oil market, for the same reasons yields moved higher in the first place.
Debt load adds to the pressure
Yields have also climbed since the U.S. national debt hit the $40 trillion mark this week. The 30-year Treasury yield hit its highest level since 2007 this week, having climbed above 5% this summer. The Trump administration has pushed to keep 10-year yields lower to ease the U.S. affordability crisis. It has managed the roughly $31 trillion Treasury bond market as one of its tools. Supply is only part of the pressure, though: the artificial-intelligence build-out is also pushing funding costs higher, alongside concerns about the economy, inflation and the fiscal picture.
That backdrop weighed on stocks Thursday. The S&P 500 slipped 0.39% to 7,678.08. The Dow Jones Industrial Average fell 0.83% to 53,017.40. The Nasdaq Composite dropped 0.85% to 26,108.23, while the VIX jumped 6.92% to 15.92.
Catrambone said Bessent probably felt it was time to draw a line and not let yields untether further, with traders still negotiating how much they want to get paid to hold U.S. government debt.
Source: MarketWatch
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