The yield on the 10-year US Treasury note eased to 4.65%, retreating from a 20-month high of 4.75% reached on August 21st, as lower energy prices reduced near-term inflation concerns. Oil and fuel prices declined after the United States chose to tighten sanctions on Iran while refraining from further military threats. Even so, longer-dated yields remained significantly higher over the month.
The Treasury announced it would draw on its general account balance to step up buybacks of long-term securities, reinforcing efforts to push yields lower following the joint intervention in support of the Japanese yen—conducted via euro sales—and the request for the Federal Reserve to raise the ceiling on its FIMA facility. Yields at the long end of the curve had surged since July, driven by heavy debt issuance from AI-related companies and wider federal budget deficits. Long-term yields were further lifted after Fed Chair Warsh indicated that raising policy rates might not be his preferred instrument to counter elevated inflation, heightening the importance of his upcoming speech in Jackson Hole.
