Yields on 30-year U.S. Treasury bonds rose despite the Treasury Department's plan to increase bond buybacks
The yield on 30-year U.S. Treasury bonds rose to 5.24% on August 20, despite the Treasury Department’s announcement of a plan to at least double the pace of Treasury bond buybacks. The day before, yields had fallen to 5.19% following the department’s announcement, but on August 18, they reached 5.33%—a level close to nearly two-decade highs.
U.S. Treasury Secretary Scott Bessent told CNBC that the department has a wide range of tools to respond to rising yields, which, in his view, do not reflect current financial conditions. He left open the possibility of additional bond purchases beyond the volume announced by the Treasury the previous day.
Bassent attributed the market movement to low liquidity in August and a significant volume of corporate debt issuances. According to him, concerns about inflation may subside after the end of the U.S.-Iran war and a decline in oil prices. Oil prices rose by more than 2% on August 20 as the situation surrounding U.S.-Iran tensions over the Strait of Hormuz remained deadlocked.
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Arun Sundaram, senior vice president at CFRA Research, believes that the resurgence in yield growth reflects the market’s perception of bond buybacks as a temporary measure to address deeper economic problems. Analysts also attribute the rise in yields to high oil prices due to the conflict with Iran, costly investments in artificial intelligence, and the large volume of U.S. government borrowing caused by the budget deficit.
All three major U.S. stock indices fell, with the Dow Jones losing 1.3%. Walmart shares dropped 9.2% after the company reported its lowest U.S. sales growth in six years. Investors are also looking ahead to next week’s annual meeting of central bank governors, economists, and financiers in Jackson Hole, where they will be watching for new Federal Reserve Chair Kevin Worsh’s stance on interest rates.
