U.S. long-term Treasury yields continued climbing even after the government announced a $6 billion buyback of longer-dated debt, with rising oil prices and concerns over federal borrowing adding to pressure across global bond markets.
The 10-year Treasury yield reached 4.856% on Wednesday, its highest level since October 2023. The move came despite the Treasury Department’s decision to repurchase $6 billion in government bonds with maturities ranging from 10 to 20 years.
The buyback program is designed to support liquidity in the Treasury market and help contain increases in long-term borrowing costs. Instead, yields moved higher after the announcement. The 30-year Treasury yield pushed above 5.3%, bringing it closer to the high recorded in August.
Higher Treasury yields can make bitcoin less attractive to investors because government bonds offer relatively strong returns with considerably lower perceived risk. Investors allocating money to bitcoin, for example, give up the 4%-5% yields available on longer-term Treasury securities.
That relationship is generally strongest when yields are rising because of robust economic growth. The current increase, however, appears to be driven by other factors.
Analysts have warned that Treasury buybacks may have limited power to reverse the forces pushing yields upward. The rapidly expanding U.S. debt burden and additional fiscal spending point to continued government borrowing and future bond issuance, areas largely outside Treasury Secretary Scott Bessent’s control. Buybacks also do not resolve the broader fiscal imbalance created by elevated government spending.
The rise in borrowing costs was not limited to the U.S. Yields also increased across major European and Japanese bond markets as investors weighed persistent inflation risks, higher energy prices and growing concerns about the ability of governments to sustain current levels of borrowing.
The $6 billion transaction follows the Treasury’s earlier decision to at least double the size of its long-duration buybacks from the customary $2 billion level. Although yields initially declined after that announcement, the move quickly reversed, sending long-term rates substantially higher.
The Treasury’s strategy involves purchasing longer-term bonds while continuing to fund government operations through borrowing at the shorter end of the yield curve. This can alter the maturity structure of federal debt, but it does not reduce the government’s overall need to borrow.
The latest developments in bond markets also came after coordinated efforts by the United States and Japan to support the yen.
Treasury Secretary Scott Bessent earlier challenged currency traders to bet against the intervention, declaring, “I am the house now.” A stronger yen is also favorable for Washington because it reduces the likelihood that Japan will need to sell U.S. Treasury holdings to finance additional efforts to support its currency. Japan is the biggest overseas holder of U.S. government debt.
Oil prices have added another source of pressure. WTI crude has risen to about $97 a barrel, matching its May peak. Higher energy costs could keep inflation elevated, potentially making the Federal Reserve’s policy decisions more difficult.
Meanwhile, the U.S. Dollar Index remains around 99 despite the yen’s sharp recovery, leaving risk-sensitive assets under pressure. Bitcoin has remained near $78,000 as traders consolidate gains following its rally from roughly $63,000 in mid-August.
