U.S. Treasury yields fell Wednesday after the department announced it would more than double liquidity support through buyback operations for longer-dated bonds.
The benchmark 10-year note yield dropped 4.9 basis points to 4.655%, while the 30-year bond yield declined 8 basis points to 5.205%. The 2-year yield edged up 0.6 basis points to 4.181%, leaving the 2-year to 10-year curve at a positive 47.4 basis points. The move followed the Treasury’s decision to expand buyback programs aimed at stabilizing the long-end of the curve amid elevated fiscal concerns.
Longer-dated euro zone bonds retreated from multi-year highs, reflecting a partial unwind of a global selloff driven by deteriorating fiscal positions, supply disruptions and inflation risks. Progress toward resolving the U.S.-Iran conflict remained stalled, and crude prices edged higher.
Investors awaited the release of the Federal Reserve’s latest policy meeting minutes and a $20 billion auction of 20-year bonds scheduled for later in the session. The minutes may offer signals on whether some Federal Open Market Committee members are considering a rate hike, despite Chairman Kevin Warsh’s decision to withhold forward guidance.
Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, characterized the Treasury’s action as a stabilizing measure but noted it could be temporary. "I don’t want to call it a Band-Aid measure but it is the first of many possible actions that the Treasury could take to support the long end," Goldberg said. He added that a more durable solution would involve reducing auction sizes for long-dated securities.
The 5-year TIPS breakeven rate held at 2.287%, while the 10-year breakeven rate stood at 2.307%, implying inflation expectations of roughly 2.3% annually over the next decade.
