Treasury Yields Defy Buybacks as Fiscal Deficit and Rate Hikes Loom
The US 30-year Treasury yield has been trading above 5% for 55 days this year, the longest stretch since 2006. Concerns over the US fiscal deficit and uncertainty around Federal Reserve policy have contributed to the prolonged elevated yields.
Markets are pricing in about 0.17 percentage point of tightening at the September FOMC meeting, with investors expecting a quarter-point rate increase. The 30-year Treasury options market is seeing bets on yields rising to 5.7% by November 20.
US Treasury Secretary Scott Bessent's announcement last month to expand existing Treasury buybacks aimed to lower long-term yields, but investors see the effect as limited. A record volume of corporate bonds was issued in August, and $215 billion of new corporate bond sales is expected in September.