US 10-Year Yield Holds Decline

The yield on the 10-year US Treasury note held around 4.64% on Wednesday after dropping nearly 10 basis points in the previous session, as falling oil prices eased inflation concerns and investors continued to assess the implications of the Treasury Department’s expanded debt buybacks. Oil prices declined for a third consecutive session, reducing concerns over near-term inflationary pressures. Meanwhile, market participants continued to debate the Treasury’s plan to at least double its buybacks, with investor Stanley Druckenmiller arguing that the move is undermining the Treasury market’s credibility and wasting an opportunity for meaningful debt reform. Elsewhere, investors awaited the latest US PCE price index report, the Federal Reserve’s preferred measure of inflation. The data comes ahead of Fed Chair Kevin Warsh’s speech at the annual Jackson Hole symposium on Friday, where he is not expected to provide clear guidance on the central bank’s policy decision in September.

The yield on the 10-year US Treasury note eased to 4.65% from the 20-month high of 4.75% on August 21st, as lower energy prices softened concerns of higher inflation in the near term. Oil and fuel prices eased after the US opted to tighten sanctions on Iran, refraining from more military threats. Still, longer-term yields remained sharply higher on the month. The Treasury stated it would use its general account balance to increase the buyback of long-term securities. This added to efforts to compress yields after the joint intervention on the Japanese yen by selling euros and the request for the Fed to increase the limit on its FIMA facility. Yields on the longer end of the curve had surged since July amid soaring debt issuance from AI companies and higher deficit spending by the federal government. Long-term yields also rose after Fed Chairman Warsh signaled that a rate hike may not be his preferred tool to combat higher inflation, increasing the stakes of his speech in Jackson Hole.

The yield on the 10-year US Treasury note steadied around 4.7% on Tuesday as investors continued to assess the implications of the Treasury Department’s expanded debt buyback program. Reports suggested that the US government may tap its cash account to finance the increased buybacks, marking a shift as such purchases are typically intended to be cash neutral and have been funded through new issuance. Treasury Secretary Scott Bessent on Monday refrained from providing further signals on a potential revamp of US debt management, while reassuring markets that auction sizes for bonds would not be reduced. Meanwhile, markets speculated that the plan may offer only a temporary solution, renewing concerns over the risks of a US debt crisis and dollar weakness. Elsewhere, investors looked ahead to the latest US PCE price index data and Fed Chair Kevin Warsh’s speech at the annual Jackson Hole symposium this week for fresh clues on the monetary policy outlook.