Global yields fall after US Treasury boosts debt buybacks

Global bond yields declined on Wednesday after the U.S. Treasury Department announced plans to enhance liquidity support for longer-term securities. The department doubled the size of its buyback operations for longer-dated nominal coupon securities, raising them to at least $4 billion per operation from $2 billion. This move followed a broad selloff driven by concerns over increasing sovereign debt.

U.S. long-dated government yields fell by up to 10 basis points, causing similar declines in European government bond yields. The Treasury's purchase of older, less liquid bonds using newly issued funds aims to improve liquidity in the $32 trillion Treasury market. These long-term bond yields serve as a benchmark for various asset classes, including mortgage rates, and sharp increases in yields pose risks to the broader economy.

The drop in yields boosted stock prices, although they later pared those gains. The dollar weakened amid the market reaction, while gold and cryptocurrency prices surged, reflecting investor unease over U.S. debt levels. Concerns about government debt often lead investors to seek hard assets like gold for protection. The dollar index fell 0.84% to 98.80, with the euro rising 0.88% to $1.1676.

Meanwhile, crude oil prices reached nearly four-week highs, as investors worried about potential Middle East tensions and slow trade through the Strait of Hormuz, further complicating global debt markets.