Treasury Department to Double Debt Buybacks Amid Rising Bond Yields
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Treasury Department to double debt buybacks after bond yield spike The Treasury Department on Wednesday said it will increase the maximum amount of U.S. debt it can buy back, a move met with declining bond yields and rising stocks. Starting next month, the Treasury plans to double the maximum value of longer-dated securities, specifically in the 10-to-20-year and the 20-to-30-year sectors, it allows itself to…
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ReutersUS Treasury to double sizes of some debt buyback operations to at least $4 billion - Reuters US Treasury to double sizes of some debt buyback operations to at least $4 billion Reuters
NBC NewsLonger-term U.S. Treasury yields dropped sharply Wednesday after the Treasury Department announced that it would increase the size of its government debt repurchases by “at least double” in a surprise move.
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The 30-year Treasury yield jumped to 5.32%, registering its highest level since 2007, before dropping slightly lower. The surge in borrowing costs threatens to raise mortgages and credit card rates, since long-term bond yields help set interest payments for various consumer loans.
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The Guardian USThe yield rate on 10-year, 20-year and 30-year treasury notes all hit 20-year highs this week, with the 30-year treasury yield rising to its highest rate since 2007. The rapid rise was concerning news for borrowers as major loans, including mortgages, are backed by treasuries.
NBC NewsEarlier this week, the 30-year Treasury yield hit its highest level since 2007, only compounding already soaring interest costs the federal government pays on the massive national debt. When bonds fall, their yields rise.
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The announcement follows the Trump administration’s intervention to prop up the yen in a partnership with the Japanese government, which owns a large holding of US treasuries.
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NBC NewsEarlier this summer Treasury, along with Japan’s finance ministry, intervened in the sliding Japanese yen. Instead of using dollars to buy yen, the Treasury sold euros and used that money to buy yen. This move — which reportedly caught the European Central Bank by surprise — may have been intended to dissuade Japan from selling some of the trillions of dollars in U.S. Treasury bonds it holds, further driving up yields.
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Since the war with Iran began at the end of February, surging energy prices have driven bond yields higher, especially longer-dated yields, as investors bet on higher inflation for longer.
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ABC NewsHigh bond yields put upward pressure on mortgage and credit card rates. Long-term government borrowing costs climbed to their highest level in nearly two decades as the Iran war showed little sign of a resolution and investors feared persistent inflation.
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The Fed, meanwhile, has opted against imposing interest rate hikes in response to the oil-driven rise in prices. The central bank could hike rates in an effort to cool off prices, but the move risks an economic slowdown that may pinch hiring.
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The Guardian USRising prices have put pressure on the US Federal Reserve to intervene with higher interest rates, which would help price increases go down to the Fed’s 2% target rate. But economists within the central bank appear divided on how to handle overheated prices, especially with pressure from the White House to lower rates.
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Fed Chair Kevin Warsh, who took the helm of the central bank this summer, has repeatedly vowed to dial back inflation.
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The Guardian USKevin Warsh, the Fed chair who came into office in May after a tumultuous nomination process, has remained tight-lipped on his view on which direction the central bank is headed, though he has overall appeared skeptical of Fed intervention.
5 details only one outlet reported
Independent claims that didn't surface elsewhere in our corpus. Treat as supplementary — not corroborated across outlets.
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01 NBC News In effect, the Treasury Department’s announcement means the agency will be stepping in as a larger buyer of longer-term bonds, which have been selling off.
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02 The Guardian US The US treasury is doubling its buyback of government debt in an effort to balance out the bond market and counterbalance investor concern over high inflation.
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03 ABC News Major stock indexes fell in response to rising yields. The Dow Jones Industrial Average ticked down 15 points, or 0.03%, while the S&P 500 dropped 0.4%. The tech-heavy Nasdaq declined 1%.
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04 Reuters Euro zone yields slip from multi-year highs after US Treasury announcement - Reuters Euro zone yields slip from multi-year highs after US Treasury announcement Reuters
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05 New York Times More Fed Officials Lost Patience About Elevated Inflation at Latest Meeting Minutes from the Federal Reserve’s July gathering showed broadening support for higher borrowing costs to stamp out lingering price pressures.
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Sources (6)
- abc
- nyt
- thehill
- nbc
- guardian
- reuters