Asian markets experienced a broad rally, with stocks and bonds rising, following the US Treasury's announcement to boost its buyback operations for longer-dated securities. This move, intended to reduce borrowing costs after yields reached multi-decade highs, led to a rebound in Wall Street, where the S&P 500 rose 0.2%, the Dow Jones Industrial Average rose 0.2%, and the Nasdaq 100 fell 0.2%. The rally in 30-year bonds drove yields down by 10 basis points to 5.18%, while the 10-year Treasury yield declined seven basis points to 4.63%. The dollar also fell to a three-month low, with the Bloomberg Dollar Spot Index declining 0.8%.
The Treasury stated it would "increase, by at least double, the size of liquidity support buyback operations" for securities maturing between 10 and 30 years. This action is seen by analysts like Lawrence Gillum at LPL Financial as a "band-aid" rather than a complete solution, but a signal that the Treasury is proactive in preventing yields from rising too quickly. Krishna Guha at Evercore noted that while the intervention could encourage buyers and discourage short-selling, it doesn't fundamentally alter the market's underlying issues, and the increased size is modest compared to the overall Treasury market flow.
Global bonds had been under pressure due to inflation concerns, rising government debt, corporate borrowing for the artificial intelligence boom, and waning demand from traditional long-dated maturity buyers. Total US public debt recently surpassed $40 trillion, having surged by a third in less than five years. The Treasury's strategy, which may involve replacing longer-dated debt with short-term securities, is likened to a version of the Federal Reserve's "Operation Twist."
In the currency markets, the euro rose 0.9% to $1.1678, the British pound rose 0.6% to $1.3609, and the Japanese yen rose 0.9% to 158.12 per dollar. Bitcoin saw a significant jump, rising 6.1% to $68,496.66, while Ether rose 10% to $2,108.26. In commodities, West Texas Intermediate crude increased 0.8% to $85.59 a barrel, and spot gold rose 4% to $4,509.27 an ounce.
