US Treasury doubles long-term bond buyback cap to $4 billion

MacroDigital Finance Impact 4
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Summary · why it matters

The US Treasury announced it will raise the per-operation cap on liquidity-support buybacks of long-term nominal coupon-bearing Treasuries to at least double, at $4 billion. The operations will run from September 9 through November 4. Investors have expanded short positions in long-term bonds amid sticky inflation from the energy shock caused by the US-Iran conflict and rising federal debt. With the US 30-year yield reaching its highest level since 2007 and Germany's 30-year federal bond yield hitting its highest since 2011, the global rise in long-term interest rates had been flagged as a market risk. The Treasury's move amounts to an adjustment of long-term yields that the Federal Reserve cannot control. In the Federal Open Market Committee meeting held on July 28 and 29, minutes released on the 19th showed participants judged inflation risks were tilted to the upside, and many noted that further rate hikes could be needed if inflation does not slow. Although the latest inflation data released after that meeting show signs of cooling, and employment and consumption also suggest a slowdown, rate-hike expectations have only temporarily receded and remain persistent. While the Treasury's response is expected to curb long-term rates in the short term, there are concerns that the effect may prove short-lived.

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％Germany 30 Year Bond Yield
DE-30Y
▼ NegativeMonetaryrelevance

Global long-term yields rise due to inflation and debt; Treasury action may only temporarily curb, but German yield remains high.

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