US Government Bond 20 Year

The U.S. Treasury Department announced on August 19 that it will double its purchases of long-dated Treasury bonds from $2 billion to $4 billion, a surprise intervention that complicates the Federal Reserve's inflation fight. Treasury Secretary Scott Bessent's move aims to push down yields on 10-, 20-, and 30-year bonds, which have surged to near multidecade highs amid above-average inflation, the removal of forward guidance by Fed Chair Kevin Warsh, and U.S. debt crossing $40 trillion for the first time. The intervention could lower corporate borrowing costs and mortgage rates, but it may force Warsh and the FOMC to raise the federal funds target rate to maintain price stability, especially as core PCE inflation shows the Iran war's price pressures have become entrenched. Warsh, sworn in on May 22, faces a dilemma: act against sticky inflation and risk angering President Donald Trump and halting the AI-driven stock rally, or do nothing and let inflation accelerate.

The US Treasury is doubling its buyback of government debt to steady the bond market amid investor concern over high inflation. Yields on 10-year, 20-year and 30-year Treasury notes hit 20-year highs this week, with the 30-year yield reaching its highest since 2007, before dropping after Wednesday's announcement. The Treasury said the move reflects its desire to provide greater liquidity support to the long-term bond market. The action follows the Trump administration's intervention to prop up the yen in partnership with Japan, a large holder of US Treasuries. Annualized US inflation was 3.4% in July, down from 4.2% in May but nearly 1% higher than 2025 rates, while gas prices are on track for the highest August on record at $4.08 a gallon.