US Treasury bond-buyback plan fails to curb rising yields

U.S. Treasury yields increased on Friday, with the 30-year rate climbing to about 5.27% and the 10-year reaching just over 4.73%, reversing most of the gains made after the Treasury announced a new bond-buyback operation. The Treasury said it would at least double purchases of 10-year, 20-year and 30-year securities, with the program slated to start on Sept. 9 and run through Nov. 4.

Market analysts remain skeptical that the expanded buying will offset higher inflation expectations, recent Federal Reserve communication shifts, and a surge in corporate debt issuance. > "We believe these measures will struggle to offset either declining Fed credibility or rising rate expectations," BNP strategists wrote in a note.

The policy adds complexity to the Federal Reserve’s stance, as Fed Chair Kevin Warsh has indicated he may prefer higher yields to tighten monetary conditions without raising short-term rates. > "We have the Fed and the Treasury basically working in sort of opposite directions," Wilmington Trust senior bond portfolio manager Wil Stith said.

The Treasury also released data showing the national debt exceeding $40 trillion, prompting criticism that the buyback program merely reshuffles existing debt rather than reducing overall liabilities.