Long-dated U.S. Treasury yields pulled back from multi-decade highs on Wednesday after the Treasury Department announced an expansion of its liquidity-support buyback program for older, less-traded debt.
The 30-year Treasury yield fell 14 basis points to 5.198%, retreating from a 19-year peak of 5.337% reached during Tuesday’s global bond selloff. The 10-year yield declined nearly 10 bps to 4.647%, down from a prior session high of 4.742%. The two-year yield, more sensitive to near-term policy expectations, held relatively steady at 4.169%, compared with 4.158% previously.
The Treasury said it would at least double the maximum purchase cap per operation to $4 billion, up from $2 billion, targeting "off-the-run" securities in the 10-20 year and 20-30 year sectors. The expanded program includes an additional $2 billion safety net per operation and remains active through the current refunding quarter, which ends November 4. Further details are expected in the next Quarterly Refunding statement.
Analysts characterized the move as largely symbolic but potentially supportive for the long end of the curve following two days of volatile trading. Vital Knowledge noted in a client note that the action was "a (largely symbolic) step by the Treasury to provide support to the long-end of the curve following the recent spike in yields, although it's fairly insignificant next [to] the forces pushing rates higher."
Deutsche Bank analysts attributed the prior session’s rout to mounting concerns over fiscal deficits, the sustainability of the artificial intelligence-driven growth boom, and risks of an energy-driven inflation resurgence. The global bond selloff had pushed long-term borrowing costs to levels not seen since before the 2008 financial crisis, prompting the Treasury’s intervention.
The expanded buyback program takes effect September 9 and aims to improve liquidity in the secondary market for older Treasuries, which have been particularly sensitive to recent volatility.
