Wall Street staged a rebound after the Treasury said it plans to boost buybacks of longer-dated bonds, a signal the US wants to lower borrowing costs after yields hit multi-decade highs.
A rally in 30-year bonds drove yields down by 10 basis points to 5.18%. Most shares in the S&P 500 rose, though chipmakers fell. The dollar hit a three-month low. Bitcoin jumped as President Donald Trump pressed Congress to pass a key crypto bill as the White House hosted industry executives.
Just two weeks after releasing its planned schedule for buybacks this quarter, the Treasury said it's “increasing, by at least double, the size of liquidity support buyback operations” for securities dated from the 10-year to the 30-year sector.
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“This is more of a band-aid than a panacea,” said Lawrence Gillum at LPL Financial. “But it is a reminder that the Treasury Department is paying attention and will do whatever it can to keep yields from getting too high too quickly.”
While the Treasury didn't indicate how the operations would be paid for, it typically relies on issuance of bills for its fluctuating funding needs. If officials are in effect replacing longer-dated debt with short-term securities, the maneuver amounts to a version of the Federal Reserve's “Operation Twist.”
Those shorter tenors are more influenced by monetary policy decisions rather than fiscal dynamics, and they shield Washington from being punished imminently for having sustained outsized budget deficits for almost three decades, according to Jose Torres at Interactive Brokers.
Bonds had been jolted in recent days, with investors demanding more compensation to protect against inflation risks and rising government debt. The move was also fueled by corporate borrowing to fund the artificial-intelligence boom and waning demand from traditional buyers of long-dated maturities.
“The intervention can help crowd in potential buyers tempted by the prior run-up in yields and force some near-term short-covering, while discouraging investors from going max short in the future for fear of being ambushed again,” said Krishna Guha at Evercore.
But the operation changes almost nothing in terms of fundamentals, and the increased size of the operations is modest relative to the flows in the Treasury market, he added.
Total US public debt surpassed $40 trillion for the first time, and has now surged by a third in less than five years, as US lawmakers continue to shrug off calls to contend with historically wide fiscal deficits.
Traders also sifted through minutes of the latest Fed policy meeting. The record showed several officials favored a rate hike last month and many indicated that tightening would be necessary if inflation didn't decline.
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Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.2% as of 4 p.m. New York time
- The Nasdaq 100 fell 0.2%
- The Dow Jones Industrial Average rose 0.2%
- The MSCI World Index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.8%
- The euro rose 0.9% to $1.1678
- The British pound rose 0.6% to $1.3609
- The Japanese yen rose 0.9% to 158.12 per dollar
Cryptocurrencies
- Bitcoin rose 6.1% to $68,496.66
- Ether rose 10% to $2,108.26
Bonds
- The yield on 10-year Treasuries declined seven basis points to 4.63%
- Germany's 10-year yield was little changed at 3.26%
- Britain's 10-year yield declined four basis points to 5.04%
Commodities
- West Texas Intermediate crude rose 0.8% to $85.59 a barrel
- Spot gold rose 4% to $4,509.27 an ounce
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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