Emerging market currencies and stocks initially rose on Thursday after the US Treasury announced an expansion of its long-duration debt buyback operations, aiming to ease pressure on rising long-end yields. This move, dubbed the "Bessent Put" by some, involved increasing buyback sizes for 10-year to 30-year securities, prompting a decline in long-end Treasury yields and a weaker US dollar. The MSCI emerging Asia equities index jumped 2.3%, and the emerging market currency index rose as much as 0.4% to a record high before paring gains, as investors welcomed the US Treasury's perceived interventionist stance.
However, the relief proved to be short-lived. By Thursday, long-term US Treasury yields climbed again, with the benchmark 10-year yield increasing 4.7 basis points to 4.7% and the 30-year yield advancing 5.5 bps to 5.249%. This upward movement in yields led to a partial recovery of the US dollar, which had dropped almost 1% on Wednesday. Analysts like Wei Li from BNP Paribas Securities (China) cautioned that the rebound was more of a "relief rally" than a sustained recovery, highlighting unresolved structural pressures such as rising global debt, AI-driven corporate supply, and elevated oil prices.
Market participants expressed skepticism about the long-term impact of the US Treasury's intervention. Luis Alvarado of Wells Fargo Investment Institute stated that the move offered only "short-term relief" because core drivers like inflation, monetary policy uncertainty, and large fiscal deficits remain. Michael Goosay of Principal Asset Management echoed this, suggesting that such interventions often fail in the long run. Despite US Treasury Secretary Scott Bessent indicating a willingness to potentially increase buyback volumes further, investors are seeking more lasting solutions to underlying issues, rather than what some termed a "little Band-Aid."
Among Asian currencies, the Korean won notably outperformed, supported by a softer dollar, resilient semiconductor and AI investment cycles, and strong external balances. Bank Indonesia maintained its policy rate at 5.75%, focusing on rupiah stability. However, investor caution regarding the Indonesian rupiah persists due to MSCI concerns about equity market accessibility. The broader takeaway is that a less supportive US dollar environment creates opportunities for selective outperformance among Asian currencies, with the Korean won standing out.
