The yield on the 10-year US Treasury note climbed to 4.74% on Friday, retesting the 20-month highs reached earlier in the week and fully reversing the drop that followed the Treasury Department’s announcement of an expanded bond buyback program. The Treasury said it would at least double its long-maturity buybacks to $4 billion next quarter, adding to recent efforts to contain yields after the coordinated intervention in the Japanese yen via euro sales and the request for the Federal Reserve to raise the cap on its FIMA facility.
Yields at the long end of the curve have been rising since July, driven by heavy debt issuance from AI-related companies and wider federal budget deficits. Long-term yields also moved higher after Fed Chair Warsh indicated that raising interest rates might not be his preferred tool to address elevated inflation, heightening the importance of the upcoming speeches at Jackson Hole. Fears of unanchored inflation were further amplified by elevated energy prices during the US-Iran blockade of oil tankers in the Persian Gulf.
