US Treasury Yields Near 5% as Bond Buybacks Fail to Calm Inflation Fears

The US Treasury tripled its long-term bond buyback cap from $2 billion to $6 billion, but this move failed to calm investors' concerns about inflation and government borrowing. The 10-year Treasury yield rose above 4.85%, its highest level since November 2023, despite the increased buying.

The Treasury's attempt to improve liquidity in the bond market may be seen as insufficient by investors, who remain focused on rising oil prices and geopolitical tensions. This has driven up inflation fears and led to higher energy costs that can ripple through various sectors of the economy.

Bitcoin traded near $78,110, down 1.4% over 24 hours, after reaching an intraday high of $79,701. The cryptocurrency's attempted breakout above $80,000 may be threatened by a sustained rise in the 10-year yield above 5%, which could add pressure to sell.

The Treasury's long-term buyback operation aims to improve market functioning rather than inject monetary stimulus or permanently reduce government debt. However, this distinction matters because the Treasury finances its purchases by issuing other securities, which can continue to drive up yields even as the operation increases buying.