US Treasury Yields Rise as Buyback Relief Fades

US Treasury yields rose sharply on Thursday, reversing the previous day’s decline following Treasury Secretary Scott Bessent’s announcement of larger buybacks of long-dated government debt. The 30-year yield climbed seven basis points to 5.26%, returning to levels seen before the announcement, while the 10-year yield reached 4.71%, close to its highest level since early 2025. The reversal suggests investors remain skeptical that the Treasury’s expanded buyback programme will provide lasting relief for elevated borrowing costs. The plan will at least double liquidity-support purchases of securities with maturities ranging from 10 to 30 years, but concerns over large fiscal deficits, persistent inflation and heavy borrowing needs continue to weigh on longer-dated bonds. Higher oil prices are adding to inflation risks, while increased borrowing linked to the artificial-intelligence investment boom is creating further pressure on bond supply.

US Treasury yields fell sharply after the Treasury announced it would significantly expand its purchases of long-dated government debt. The department said it would at least double the size of liquidity-support buyback operations covering securities with maturities from 10 to 30 years. The move came after 30-year Treasury yields recently climbed to their highest level since 2007, raising concerns about liquidity and market stability. Following the announcement, yields declined across the curve, with the 30-year rate falling as much as 9 basis points to 5.19%. The decision signals that Treasury officials are prepared to intervene if borrowing costs rise too sharply or market liquidity deteriorates. The announcement also came ahead of a $16 billion auction of new 20-year bonds, adding further focus to demand for longer-dated debt. Treasury Secretary Scott Bessent previously described the buyback program as an important tool for addressing market dislocations and supporting liquidity.

The yield on the 30-year US Treasury bond surged to above 5.2%, the highest since 2007, to reflect concerns of higher inflation in the longer term. The Federal Reserve held rates unchanged in its July meeting, aligned with the consensus, despite rate futures showing that one third of the market was positioned for a hike. The rise for the 30-year tenure led the movements among Treasuries following controversial statements by Fed Chairman Warsh during the press conference. The reluctance to signal a rate hike as the Fed's preferred response to inflation drove long-dated yields to surge, even though those on shorter maturities fell. The Chair also signaled a positive response in seeing long-term yields rise in Q2, akin to a policy tool, also limiting the urge for a rate hike. Underlying inflation gauges in the US flared higher in Q2 after tariffs and soaring energy prices lifted costs among various industries in the second quarter.