Rand and JSE jump on US Treasury bond buyback
The dollar is also under pressure from expectations that the Fed may delay further rate hikes until December.
On Wednesday, the US 10-year Treasury yield plummeted, settling at 4.651% after peaking at 4.712% earlier in the day. The Treasury Department's surprise announcement that it would double the size of its buyback operations for longer-dated securities sparked the decline. The Treasury plans to increase buyback operations for nominal coupon securities in the 10-year to 20-year and 20-year to 30-year sectors from $2 billion to at least $4 billion per operation, with changes effective from September 9 through November 4.
The move aimed to calm the bond market amid concerns over government deficits, inflation, and sovereign debt supply. While the short-term impact appears positive, the long-term implications remain uncertain, with Gennadiy Goldberg of TD Securities suggesting this could be just the first of several potential measures. The intervention also contributed to a weaker US Dollar, as falling yields reduced some of the currency's interest-rate support.
Investors will now look to the Federal Open Market Committee (FOMC) minutes, due later that day, for any hints of potential interest rate hikes. Additionally, the upcoming 20-year US Treasury auction will provide further insight into investor appetite for long-dated US government debt.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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