US 10-Year Yield Rises to 3-Year High After Buyback

The yield on the 10-year US Treasury note rose toward 4.85% on Wednesday, the highest since October of 2023, after the Treasury Department tripled the buyback on notes and bonds to take place tomorrow. The department will purchase $6 billion in off-the-run securities, compared with Secretary Bessent's earlier announcement that buybacks would at least double to $4 billion, among the multiple moves by Washington to supress long-maturity yields. Yields on the long-end of the curve have surged this year as high oil prices due to the war in Iran raised underlying inflation, risking a rate hike by the Federal Reserve in upcoming meetings. This was magnified by record-setting corporate debt supply, with AI companies issuing north of $1.5 trillion in new issuance. On top of that, pressure on the Japanese yen drove Tokyo to repeatedly sell Treasury securities to defend the currency. Still, yields on the 10-year note recouped some gains after the fresh auction stopped-through 1.5bps.

The yield on the 10-year US Treasury note rose to 4.85% on Wednesday, the highest since October of 2023, after the Treasury Department tripled the buyback on notes and bonds to take place tomorrow. The department will purchase $6 billion in off-the-run securities, compared with Secretary Bessent's earlier announcement that buybacks would at least double to $4 billion, among the multiple moves by Washington to supress long-maturity yields. Yields in the long-end of the curve have surged this year as high oil prices due to the war in Iran raised underlying inflation, risking a rate hike by the Federal Reserve in upcoming meetings. This was magnified by record-setting bond supply from corporate debt, with AI companies issuing north of $1.5 trillion in new issuance. On top of that, pressure on the Japanese yen drove Tokyo to repeatedly sell Treasury securities to defend the currency.

The yield on the 10-year US Treasury note rose past 4.8% on Wednesday, the highest since October of 2023, as higher energy prices supported the case for interest rate hikes by the Federal Reserve this year. The US reportedly struck multiple Iranian tankers and Iranian forces continued to attack US forces in the Middle East, escalating the ongoing war and prolonging the likely suspension of fuel from the region. Higher fuel prices had already impacted gauges of underlying inflation. This drove multiple FOMC members to call for higher interest rates to combat the threat of price growth, including Chairman Warsh, who noted that a rate hike is warranted if inflation increases further. Meanwhile, estimates that AI companies raised $1.5 trillion in debt this year limited primary dealers' allocation for government securities, also lifting yields. Treasuries were pressured across the curve despite Secretary Bessent's warning against shorting bonds ahead of his buyback announcement.