Yesterday’s biggest positive was Treasury intervention in the bond market.
The US Treasury announced that it will double long-duration bond buybacks to at least US$4 billion per operation from September through early November. The move followed the 30-year Treasury yield reaching nearly 5.34%, its highest in almost two decades.
That is meaningful relief, but I would not interpret it as the end of the bond problem. The underlying issues—US fiscal deficits, inflation and enormous AI infrastructure financing requirements—remain unresolved.
They showed that “many” policymakers believe higher rates may ultimately be required if inflation does not continue falling, while three policymakers had already voted for a 25 bp hike at the July meeting.
The current policy rate remains 3.50%–3.75%.
The Fed still looks likely to hold at the 15–16 September meeting, but markets are now pricing better-than-even odds of a rate increase by the October meeting, and a high probability of one by December if inflation remains sticky.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
- AllenBartlett·08-21AI capex is the part people still underprice. Treasury buybacks help liquidity, but deficit supply and private financing are still fighting for the same long-end bid.LikeReport