Treasury Doubles Buybacks to $4 Billion, Weighing on Dollar

The U.S. Treasury Department more than doubled its planned purchases of longer-term Treasurys to at least $4 billion, a move that pulled the 10-year yield down to 4.64 percent and set the stage for a weaker dollar across global markets.

"The U.S. acted as expected to suppress long-end rates, and this intervention is likely only the beginning because Washington has few alternatives," said Chen Guo, deputy director and chief strategist at East Money Securities Research Institute.

The 10-year yield fell to 4.64 percent from 4.71 percent late Tuesday, while the 30-year yield dropped to 5.18 percent from 5.28 percent after touching its highest level since 2007 earlier this week. The S&P 500 rose 0.2 percent to 7,707.98, the Dow Jones Industrial Average added 119 points to 53,463.05 and the Nasdaq composite gained 41.38 to 26,331.09.

The stakes are high because elevated yields drag on the economy and undercut stock valuations after Wall Street set records on artificial-intelligence enthusiasm. Chen said the intervention is bullish for gold, digital currencies and renminbi assets while bearish for the dollar, and for A-shares it favors gold miners, non-ferrous metals, pharmaceuticals, consumer staples, dividend payers and stable-growth blue chips.

The Treasury said it will at least double purchases from Sept. 9 through Nov. 4 "to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants." The buyback program, expanded from $2 billion, targets maturities of 10 to 20 years and 20 to 30 years.

Longer-term yields are set by bond investors rather than the Federal Reserve, which controls only very short-term overnight rates. Investors have demanded more interest to compensate for inflation running above the Fed's 2 percent target, government debt approaching $40 trillion and the war with Iran that pushed oil prices higher. The 10-year yield had climbed from 3.97 percent before the conflict began in late February.

The transmission chain runs through borrowing costs. Mortgage rates track the 10-year Treasury, and the average 30-year fixed mortgage is near its highest level in a year, while companies face more expensive financing for the data centers powering the AI boom. Higher yields also draw capital away from risk assets, pressuring stocks, gold and bitcoin alike.

Skeptics question whether the move will hold. "The operation changes almost nothing in terms of the fundamentals, in particular the unchanged need to finance the tidal wave of hyperscaler debt in addition to very large government deficits," Krishna Guha, an analyst at Evercore ISI, and colleagues wrote. BNP Paribas strategists called the buybacks "necessary, but not sufficient," warning they may not offset a continued loss of Fed credibility.

The Federal Reserve, meanwhile, appears more likely to raise its benchmark rate than cut it. At its July meeting, three policymakers voted to raise the fed funds rate while nine voted to hold, and Chair Kevin Warsh's cautious signals pushed longer-term yields higher. Markets now look to Warsh's Aug. 28 speech at Jackson Hole for direction, with many on Wall Street expecting the Fed to hold rates steady at its September meeting.

If the Treasury's limited firepower fails to sustain lower yields, the dollar could rebound and pressure the very assets Chen expects to benefit. But if the intervention marks the start of a broader campaign, the strategist's call for a weaker dollar, higher gold and digital-asset prices, and a stronger renminbi could play out over coming months.

This article is for informational purposes only and does not constitute investment advice.