Bond yields rise after Treasury Department announces size of buyback operation
The Treasury Department building is seen in Washington
New York (CNN) — Bond yields rose Wednesday after the Treasury Department said it would buy back up to $6 billion of government bonds, putting a dollar figure on the operation first announced last month.
The 10-year US Treasury yield rose to 4.85%, its highest level since 2023. If the 10-year yield ends the day above 4.82%, it would be the highest closing level since October 2023.
The Treasury Department on August 19 announced it would at least double the size of bond buybacks from September to November. The announcement on Wednesday pins the buybacks at up to $6 billion, triple the size of the standard $2 billion operation.
Those buybacks are set to take place on Thursday, putting the bond market back in the spotlight. Bond yields have surged this year, raising the cost of borrowing and exacerbating concerns about affordability.
The buyback operation aims to tame rising bond yields, which have climbed in recent weeks to multi-year highs. Treasury Secretary Scott Bessent is flexing the tools at his disposal at the Treasury Department to try and temper the rise in yields.
Yields have climbed across the globe as investors reckon with surging energy prices and potential central bank rate hikes. A deluge of corporate debt to fund the AI buildout is also pushing up yields.
In the backdrop, rising government deficits and concerns over fiscal health are adding to the bond market uncertainty.
Buybacks from the Treasury Department are a standard operation in bond markets, but the size and timing of the announcement highlights the Trump administration’s sensitivity to the rise in yields.
While the buybacks can provide short-term relief, they don’t change the fundamentals contributing to higher yields, from rising corporate debt issuance to lingering concerns about government deficits.
Yields rise when bond prices fall. Investors are selling bonds, pushing prices lower and yields higher. The rise in yields is lifting borrowing costs for consumers and governments alike.
Bond yields help set interest rates across the economy. The 10-year US Treasury yield is the benchmark for mortgage rates. As the 10-year yield has surged this year, mortgage rates have climbed. The average 30-year fixed mortgage rate rose last week to its highest level since July 2025.
A surge in bond yields can make life less affordable and compound concerns about the cost of living.
The rise in yields is a global phenomenon, with borrowing costs in Europe and Asia also hitting multi-year and multi-decade highs. Bond yields in France, Italy and the United Kingdom also surged on Wednesday.
The-CNN-Wire
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