US Treasury Repurchase Spooks Markets, Yields Soar

The US Treasury increased its long-term bond repurchase scale from $4 billion to $6 billion, but this move led to higher yields, not lower ones.

Despite expectations that the repurchase would suppress yields, the 10-year U.S. Treasury yield rose to a new high of 4.85%, and the 30-year yield broke above 5.3%.

This unexpected rise in yields is attributed to several factors: sovereign funds are withdrawing from US bonds, with Norway's Government Pension Fund Global planning to reduce its allocation to US bonds by about $80 billion; Japan, which holds a large portion of US bonds, is expected to raise interest rates next week, drawing away overseas buying; and the supply side of the bond market remains strong, driven by federal deficits and refinancing.

The rise in yields has also had an impact on gold prices, with brief selling off before turning around and rising. However, analysts point out that the structural rise in long-term bond yields implies concerns about US fiscal policy sustainability and the independence of the Federal Reserve.