SAEDNEWS: The U.S. Treasury’s plan to increase long-term bond buybacks failed to prevent renewed pressure in the bond market, with yields rising again as investors remained concerned about debt, inflation and fiscal conditions.
According to SaedNews: The U.S. Treasury’s effort to stabilize the bond market and reduce borrowing costs came under renewed pressure just one day after announcing an expanded bond-buying program, Reuters reported.
Long-term U.S. Treasury yields clim bed again on Thursday, reversing much of the decline recorded the previous day. The Treasury had announced Wednesday that it would double its purchases of long-term bonds during the two months before the November midterm elections.
The announcement initially pushed yields lower, but the calm proved temporary as investors again priced in concerns over the U.S. fiscal position. Reuters analyst Mike Dolan described the measure as more of a short-term attempt to calm markets than a solution to the country’s underlying economic problems.
Rising government debt, a large budget deficit and inflation remain unresolved, while bond purchases alone cannot address those challenges. Pressure has intensified as total U.S. debt has surpassed $40 trillion.
Investors are also uncertain about the Federal Reserve’s future interest-rate path. Minutes from the central bank’s latest meeting showed that inflation remains a significant concern.
The 30-year Treasury yield reached about 5.25% on Friday, while the 10-year yield stood near 4.71%. Higher yields increase borrowing costs for the government, companies and households and could place additional pressure on stock markets.
Higher oil prices have added to those concerns. Brent crude rose to $94.71 a barrel on Friday before edging lower. More expensive energy could revive inflation and limit the Fed’s ability to cut interest rates.
The Federal Reserve has also approached the Treasury move cautiously, stressing that monetary policy remains focused on inflation and employment and that Treasury intervention should not affect the central bank’s independence.
Reuters warned that continued reliance on short-term bond-market interventions instead of addressing the budget deficit and debt growth could weaken investor confidence in U.S. Treasuries and put pressure on the dollar.
Meanwhile, the bond-market pressure has spread internationally. Asian stocks ended the week lower, while European markets were also heading toward a weekly decline amid higher bond yields and oil prices.
