A closely watched bond buyback program went off as planned, though with the Treasury Department purchasing even fewer securities than it had indicated Wednesday.
The 10-year U.S. Treasury note yield — the key benchmark for mortgage borrowing, auto loans and credit card debt — was up almost almost 10 basis points at 4.938%. That’s the highest level since October 2023.
The 2-year Treasury note yield, which is typically more sensitive to short-term Federal Reserve interest rate decisions, hit a high of 4.56%, its highest trading level since July 2024.
The longer-dated 30-year Treasury bond yield, which moves in line with broader geopolitical risks, was up more than 5 basis points at 5.342%.
One basis point is equal to 0.01%, and yields and prices move in opposite directions.
On Thursday, Treasury repurchased nearly $5.2 billion in off-the-run 10- and 20-year notes, only about half of the $10.5 billion offered. The operation was concentrated among a few holders, likely primary dealers, indicating that the buyback program is targeted at providing liquidity in specific areas of the market, rather than a broad-based effort to scoop up government debt.
At the same time, the rise in oil prices, and the impact it may have on inflation and interest rates in the future, overshadowed a wholesale inflation reading that showed prices rose 0.4% in August. That rise was in-line with Dow Jones consensus estimates. Excluding food and energy, core prices rose 0.2% in the month, slightly lower than the forecasted 0.3% increase.
Yields also remained higher even after a strong 30-year auction, which showcased better-than-expected demand. “Today’s 30-year auction was very strong with a stop-through of 2.7 bp and non-dealer bidding of 97.8% vs. an 88.5% 6-reopening average,” BMO Capital Markets said.
With the wholesale price data out of the way, and the 10-year note yield touching multiyear highs, investors will now look ahead to consumer price data that is due on Friday for clearer insights into the U.S. inflation picture and next week’s Federal Reserve interest rate decision.
About the Author
