Treasury Intervention Weighs on Dollar as Long-Term Yields Plummet

The U.S. Treasury Department made a surprise announcement to increase the scale of long-term Treasury bond repurchases, leading to a rebound in the Treasury market and a decline in long-term yields.

This move drove a notable decline in long-term yields, with the 30-year yield dropping by approximately 8 basis points at one point. The dollar's interest rate advantage was eroded as a result, contributing to its fall on Wednesday.

The Bloomberg Dollar Spot Index fell by as much as 0.7% during intraday trading, marking its largest decline in three weeks and touching its lowest level since mid-May. The dollar declined against all major currencies, with the Swiss franc and Swedish krona leading the gains, while the Japanese yen also strengthened significantly.

The U.S. Treasury's move was seen as an attempt to alleviate pressure on the long-end U.S. Treasury market, which has faced sustained selling pressure due to concerns over inflation and bond supply. Market participants believe that this action signaled the Treasury is closely monitoring bond market volatility.