The U.S. Treasury said it would at least double the size of liquidity-support buyback operations for longer-dated nominal coupon securities to $16 billion per quarter, effective September 9. The announcement, which followed the previous quarterly maximum of $8 billion, signaled stepped-up intervention in the Treasury market. A further update on buyback sizes is scheduled for November 4, 2026, alongside the next quarterly refunding.
The move altered market sentiment almost immediately. Long-term U.S. yields fell, equities recovered from earlier losses, and the dollar weakened sharply against major peers. The 10-year Treasury yield dropped five basis points, while the 10-year German Bund yield fell six basis points after the announcement. In Asia-Pacific, equities snapped a two-day slide, led by a 5.9% gain in South Korea’s Kospi, though European markets showed limited follow-through with the Stoxx 600 struggling to sustain gains after a six-day losing streak.
The dollar’s retreat was broad-based. Against the yen, the greenback fell from around JPY159 to a seven-day low near JPY158, retracing 38.2% of its recovery from the August 3 intervention-inspired low of JPY155.25. It later recovered to JPY158.75, where sellers emerged, and held around JPY158.20 in the European morning. Options totaling $1.3 billion expire at JPY158 today. The euro advanced to $1.17 for the first time since mid-May, nearing the halfway point of this year’s range and approaching the 61.8% retracement near $1.18.
Sterling strengthened to $1.3650, its best level since May 11, surpassing the 61.8% retracement of its decline from the year’s high near $1.3870 in late January. The Canadian dollar also gained, with the loonie approaching CAD1.3760, a three-month low, after falling from CAD1.3880 before the announcement. Support is seen near CAD1.3700.
Commodity-linked currencies extended gains. The Australian dollar tested $0.7130, its highest since mid-May, with a potential technical target between $0.7175 and $0.7200. The Mexican peso strengthened to MXN16.9425, holding near that level today, while the Colombian peso reached its strongest level since October 2018 despite the government’s declaration of an economic emergency late yesterday. The offshore yuan fell to CNH6.7280, a low not seen since February 2023, with the People’s Bank of China setting the daily fix at CNY6.7808, the weakest since early 2023.
Gold rallied nearly $188, or 4.3%, to above $4,523, its highest in more than two months, before paring gains to around $4,478. Silver surged from an eight-day low near $62.45 to nearly $66.85, its strongest settlement since June 17. October crude oil posted an outside-day gain, reaching almost $86.85, though it remains below last month’s high slightly above $88. European bond yields were narrowly mixed after the initial drop, while U.S. 10-year yields steadied near 4.67%.
U.S. economic data released this week included a jump in the August Empire Manufacturing survey to 20.6 from 15.6, its best reading since late 2021. The Philadelphia Fed’s August business outlook is expected to decline to a median forecast of 25.0 from 41.4 in July, while weekly jobless claims rose to 209,000 last week after three consecutive weekly increases. Continuing claims stood at 1.78 million at the end of July, indicating steady labor market conditions despite recent volatility.
