US Treasury doubles long-end buybacks to $4bn, arresting global bond selloff
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The U.S. Treasury doubles long-end bond buybacks to at least $4 billion per operation, arresting a global rise in long-term borrowing costs. The 30-year Treasury yield fell nine basis points to 5.19% overnight and held steady in Tokyo. German 10- and 30-year borrowing costs retreated after hitting 15-year highs on Wednesday.
Key Facts
- The U.S. 30-year Treasury yield fell nine basis points to 5.19% overnight and was steady in Tokyo trade on Thursday.
- German 10- and 30-year borrowing costs hit 15-year highs on Wednesday before retreating on the buyback news.
- Long-end yields in Japan dropped sharply ahead of a closely watched 20-year auction.
- The $4 billion per operation buyback is negligible in a Treasury market valued at $32.2 trillion.
- The buyback announcement follows U.S. Treasury purchases of yen in the currency market.
The Buyback Operation
The U.S. Treasury said the larger buyback operations were intended to bolster market liquidity. Peter Cardillo, chief market economist at Spartan Capital Securities, said the move relieves short-term pressures in the long end. The announcement doubled long-end buybacks to at least $4 billion per operation, a day after the benchmark long bond yield surged to its highest level since 2007. The buyback amount is negligible in a Treasury market valued at $32.2 trillion. The move follows the U.S. Treasury buying yen in the currency market, and analysts said it showed the administration's sensitivity to rising long-term rates.
Market Reaction
The U.S. 30-year yield fell nine basis points to 5.19% overnight and was steady in Tokyo trade on Thursday. Long-end yields in Japan dropped sharply ahead of a closely watched 20-year auction. German 10- and 30-year borrowing costs retreated from 15-year highs hit on Wednesday. Moves in Australian and South Korean debt markets were in the same direction but far smaller, as were rallies in bund and French debt futures.
Fiscal Pressures
J.P. Morgan analysts said the buyback brought some immediate relief to borrowing costs but did not address underlying structural challenges. Rates are rising because of unsustainable structural fiscal deficits and firming inflation expectations, the analysts said. Worldwide long-term borrowing costs have hit multi-decade highs as governments pile on record debt to fund expanding welfare and defence spending. Long-term borrowing costs serve as a benchmark for pricing corporate bonds, equities and real estate.
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US Treasury doubles long-end buybacks to $4bn, arresting global bond selloff
