The US Treasury's unexpected announcement of expanded bond buybacks has put a brake on the rise in global long-term interest rates. The department said it will double the size of its liquidity-support purchase operations for longer-dated nominal coupon securities from 2 billion dollars to at least 4 billion dollars per operation. While that amount is tiny in the 32.2 trillion dollar US Treasury market, the move came shortly after the Treasury conducted yen-buying intervention in currency markets, and analysts see it as a sign of the administration's sensitivity to rising long-term yields and its willingness to intervene in markets. JPMorgan analysts said the announcement immediately eased borrowing costs somewhat, but noted that, like Japan's recent intervention, the Treasury's action masks underlying structural issues rather than addressing them. They added that over the longer term it could raise risk premiums, reflecting a Treasury that is stepping into markets and moving away from the principle of being regular and predictable. The 30-year US Treasury yield fell 9 basis points in overnight trading to 5.19 percent and was little changed in Tokyo trading on the 20th.
JPMorgan Chase & CoJPMorgan analysts commented on Treasury buybacks, noting it eases borrowing costs but masks structural issues, with mixed long-term implications.
Treasury doubles bond buybacks, causing 30-year yield to fall 9 bps to 5.19%.
