US 10-year Treasury bond yields rose to near 4.85% this Wednesday, the highest value since 2023, after the debt buyback plan announced by Scott Bessent, US Treasury Secretary, fell short of market expectations. The decision aggravated pressure on US public debt, on a day also marked by oil climbing above 100 dollars per barrel.
The Treasury Department will buy back up to 6 billion dollars in bonds with maturities between 10 and 20 years in an operation to take place on Thursday. The amount represents three times the purchases made in recent months, but fell below the 8 to 10 billion dollars that several Wall Street analysts had anticipated. In August, Bessent had promised to at least double long-term debt buybacks to 4 billion dollars per operation, creating high expectations that were not met.
The market reaction exposes investors' doubts about the effectiveness of the buyback program, revealing that these operations are mostly cosmetic and that the real issue the Treasury needs to resolve is the trajectory of public debt and deficit. The 10-year bond yield eased after an auction with solid demand, settling near 4.84%.
Brent crude oil exceeded 100 dollars per barrel, six-week highs, after a new wave of attacks in the Middle East, with the United States destroying five Iranian oil tankers. This energy shock fuels fears that inflation will accelerate again, precisely in the week when producer and consumer price data are released that will weigh on the Federal Reserve's decision. Futures markets already assign 59% probability to an interest rate hike by the US central bank at the September 15-16 meeting.
