US Treasury yields hit fresh long-term highs amid surging Oil prices, bond buybacks

The 30-year US Treasury note's yield exceeds 5.3%, nearing a 2007 record high. The 10-year Treasury note reached a 4.865% high earlier on Thursday, following a 25 basis point rally in under two weeks and a half-point increase since late June. Two-year yields have breached the top of the last two years' range at just under 4.5%. Financial experts disagree on the primary reason for this trend, with some attributing it to higher US government debt and investors demanding higher compensation for Treasury bonds, especially long-dated ones with more risk.

Stephen Miran, former Chief US Economic Advisor under President Trump, believes the rally is due to investors' expectations of long-run economic growth. The US Treasury's USD 6 billion buyback of long-term securities aims to support liquidity in the bond market, but markets seem disappointed by the size of the intervention. Analysts estimate that if the Treasury maintains nine buybacks per quarter, annual purchases could reach over USD200 billion.

However, the impact of this program is uncertain, and the size of operations may increase. Surging oil prices contribute to the bond yield rally via inflation, with Brent Oil nearing $100 after the US and Iran attacked oil tankers. The upcoming US Producer Price Index report, ahead of the Consumer Price Index due Friday, will provide more insight into inflationary trends and the Federal Reserve's monetary policy decision.

The Fed aims to achieve price stability and full employment through interest rate adjustments, making the US Dollar stronger when inflation rises above its 2% target. Monetary policy decisions are made at eight Fed meetings annually by twelve officials. In extreme situations, the Fed could resort to Quantitative Easing, printing more dollars to buy high-grade bonds and weaken the US Dollar. Gold is higher following an intraday dip to sub-$4,400, ahead of US inflation figures.