US treasury doubles debt buyback to steady bond market amid inflation fears

The U.S. Treasury has doubled its debt buyback in a bid to stabilize the bond market and allay fears of high inflation. Yields on 10-year, 20-year, and 30-year treasury notes reached record highs this week, with the 30-year yield hitting its highest rate since 2007. This surge in yields was a cause for concern among borrowers, as many loans, including mortgages, are backed by treasuries.

The decision to double the buyback came after Treasury Secretary's pledge to "provide greater liquidity support" to the long-term bond market. The move aims to alleviate pressure on the bond market following the expiration of a two-month ceasefire between the U.S. and Iran, which has yet to result in a resolution.

The announcement of the increased debt buyback came as a relief to investors, who had been spooked by the political instability following the expiration of the ceasefire. The Treasury Department explained that the policy reflects the department's desire to bolster liquidity in the bond market.

Despite the recent drop in yields, inflation remains a pressing issue in the U.S. The annualized inflation rate for July was 3.4%, down from a three-year high of 4.2% in May, but still 1% higher than the rates in 2025. A significant portion of the price increases can be attributed to oil prices, which have dropped from their March peak but remain higher than pre-war levels.

Oil prices are predicted to reach record highs for August, with gas costing $4.08 per gallon, about $1 more than last year. The U.S. stock market, however, has remained resilient amid the rising prices, with the S&P 500 closing at another record high last week. The Federal Reserve, faced with the challenge of high inflation, is considering raising interest rates to curb inflation, but the decision is met with skepticism from some within the central bank, including the Fed Chair, Kevin Warsh, who has expressed doubts about the Fed's intervention.