US 10-year Treasury yield tumbles as Treasury steps in to calm bond market
The US 10-year Treasury yield declines sharply on Wednesday, trading at 4.651% at the time of writing after reaching an intraday high of 4.712%.
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.
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