Key facts
- The US Treasury announced a $6 billion plan to buy back government debt.
- The yield on 10-year US treasuries rose to its highest level in three years.
- The yield for the 30-year treasury bond hit about 5.2%, the highest since the 2008 financial crisis.
- US government debt reached $40 trillion for the first time in history in August.
- The annualized inflation rate hit a three-year high in May, falling to 3.4% in July.
- Brent crude oil prices rose past $100 on Wednesday.
The US Treasury's attempt to lower borrowing costs through a $6 billion bond buyback plan was met with investor indifference, as yields on 10-year treasuries climbed to a three-year high. The move, announced by Treasury Secretary Scott Bessent on August 19, aimed to alleviate pressure on interest rates caused by a selloff in the US bond market.
However, the size of the buyback failed to appease bond buyers, and yields continued to rise. The yield on 30-year Treasury bonds reached approximately 5.2%, the highest since the 2008 financial crisis. This trend is partly attributed to rising inflation and uncertainty stemming from the war in Iran, which has spooked investors away from US bonds.
US government debt surpassed $40 trillion in August, doubling in a decade. Higher yields could lead to increased interest rates on loans such as mortgages, student debt, and car loans. The situation intensifies pressure on the Federal Reserve to manage inflation, which stood at 3.4% in July, up from the previous year largely due to higher energy prices.
President Donald Trump commented on the situation, predicting a drop in oil prices after the midterm elections, despite Brent crude surpassing $100 per barrel amid escalating conflict in the Middle East. Trump also urged the Fed to lower interest rates. Fed Chair Kevin Warsh, in a recent speech, emphasized the Fed's commitment to stable prices but did not indicate immediate rate changes.