U.S. Treasury yields climbed Wednesday as energy prices broke through key levels amid deepening Middle East conflict, raising the stakes for upcoming Federal Reserve action and a round of accelerated buyback operations.
The Treasury Department said Thursday's scheduled buyback would reach up to $6 billion in 10-year to 20-year maturities, marking an increase from the $2 billion originally planned and following last month's directive to raise buyback sizes to at least $4 billion. Media reports had indicated market participants were expecting operations of at least $10 billion.
Benchmark 10-year yields rose 4.2 basis points to 4.846%, after a marginal 1.2-basis-point gain to 4.816% prior to the buyback announcement. Shorter-end 2-year yields gained 2.5 basis points to 4.423%.
In energy markets, Brent crude futures breached $100 a barrel — crossing the triple-digit mark for the first time since May — reaching $107.35, up 2.62%. The spike followed a widening of military engagements across the Middle East. Iranian-backed Houthis in Yemen launched coordinated strikes on several Saudi cities on Tuesday, the United States carried out direct attacks on multiple Iranian oil tankers, and Iran responded with a missile strike on a U.S. military base in Jordan.
On the data front, the August U.S. nonfarm payrolls report showed employers added 162,000 jobs, exceeding expectations. Money markets now price roughly a 60% probability of a 25-basis-point interest rate increase at the Federal Reserve's policy meeting on September 15–16.
Investors will look ahead to Thursday's Producer Price Index release and Friday's Consumer Price Index print for further signals on the inflation trajectory that will guide Fed deliberations.
