The yield-suppressing effect of the expanded long-term Treasury buyback measures announced by the U.S. Treasury on the 19th faded in just one day. The Treasury unveiled an unusual step of raising the per-operation cap for buybacks of 10- to 30-year Treasuries to at least more than double, at 4 billion dollars, or about 640 billion yen. On the day of the announcement, buying of long-term bonds swelled and yields fell sharply. However, inflation concerns remained persistent amid fiscal anxiety and higher crude oil prices caused by worsening conditions in the Middle East, and from the 20th onward rates turned higher. Concerns are growing that there is no way to prevent the expansion of the federal debt, which has topped the 40 trillion dollar mark, or about 6.4 quadrillion yen, for the first time. The fact that the buybacks, running from September through November, are merely a stopgap measure is also seen as a factor. Treasury Secretary Bessent mentioned on U.S. television on the 20th the possibility of further raising the cap, but some in the market are critical, saying it would instead reveal the dire situation and prove counterproductive. Securing the funds needed for the buybacks is expected to involve issuing short-term bills, which carries the risk of pushing up short-term rates and worsening financial institutions' funding conditions. Federal Reserve Chair Warsh, who took office in May, is opposed to supporting Treasury prices for fiscal assistance purposes, but market speculation is emerging that the Fed could become the buyer to avert a surge in short-term rates.
Long-term yields rise as buyback impact fades amid inflation and fiscal worries.
Treasury buyback effect fades, yields rise on inflation and fiscal concerns.
Short-term rates may rise due to bill issuance for buybacks, pressuring yields.
