GGMA Markets Briefing: The US Treasury Blinks: Bessent's Buyback Overwhelms a Hawkish Fed
The US Treasury moved to rein in rising long-term bond yields, saying it would at least double its planned purchases of outstanding ten- to thirty-year debt (BBG). Yields declined in response, and the move spilt over into Asian bond markets, even as Fed minutes released the same evening showed several policymakers had wanted to raise rates last month (BBG).
A Bloomberg index of Treasuries maturing in twenty years and beyond jumped 1.7% on Wednesday, its biggest one-day gain since February 2025, after the thirty-year yield had reached its highest since 2007 earlier in the week (BBG). Overnight, the rally extended, the US 30-year easing 0.8bp to 5.18% and the 10-year 0.8bp to 4.64% (BBG). Australian and Japanese bond yields followed, the Australian 10-year down 5.4bp to 5.00% and its Japanese counterpart down 6.6bp to 2.84%, with the former also helped by a weaker-than-expected Australian labour market report (LS).
The announcement came two weeks after the Treasury had already published its buyback schedule, and this month it had separately opened the door to cutting issuance of longer-dated debt. On 31 July the same secretary oversaw the first American purchases of yen in three decades, an action read as reducing Japan's need to sell down its Treasury holdings (BBG). One former Treasury official now at a research group called him an activist, adding that it harkens back to his hedge-fund background (BBG). One chief investment officer said the buyback suggests the Treasury is highly concerned about long-term borrowing costs and that, as with the yen, the effect will be temporary because the buybacks cannot be sustained for long (BBG). A bank research team warned separately that an open-ended programme carries credibility risk and clouds the outlook for bill supply, since replacing long debt with short paper amounts to a version of Operation Twist (BBG) (BBG). The backdrop is a public debt stock that has passed forty trillion dollars, a level that has revived talk of a doom loop between borrowing costs and the deficit (BBG). Meanwhile, a prominent asset manager was identified as the firm behind a four billion dollar contrarian bond trade, positioning against the very move that had gripped the market (BBG).
The Fed minutes showed that several participants favoured a quarter-point increase at the July meeting, and many judged that policy tightening would likely be necessary if inflation did not decline, with some adding that financial conditions might not be restrictive enough to return inflation to target (BBG). The decision carried three dissents, from Hammack, Kashkari and Logan, all of whom wanted the rise immediately (BBG). A few of them argued that moving then would forestall a steeper and more costly sequence later (BBG). One head of US rates strategy said Federal Reserve rate rises could help flatten the yield curve (BBG).
Currently, STIR traders price eight basis points of tightening for the September Fed meeting, a 31% probability of a rate rise, and 22 basis points cumulatively by December. For the ECB, they price 23 basis points for September, a 93% probability, and 42 basis points cumulatively by December. For the BoJ, they price 20 basis points for September, a 78% probability, and 39 basis points cumulatively by December.
In stocks, advances in Asia were led by a 5.5% jump in South Korea's Kospi, with SK Hynix surging 12% on a share buyback plan and Samsung up 8.5%, and the regional equity gauge snapped a two-day losing streak with a 1.6% gain (BBG). The Nikkei rose 0.99% to 66,130, the Hang Seng 1.26% to 25,779 and the emerging-market index 0.86% to 1,704, while US futures edged up, the S&P 500 contract 0.11% to 7,738 and the Nasdaq 0.36% to 29,618. European shares were set to drop for a seventh consecutive day, the Euro Stoxx 50 down 0.19% at 6,458 and the DAX down 0.16% at 26,142 (BBG).
In Australia, employment fell 15,800 in July against expectations of a 12,000 rise, entirely through part-time roles, and the jobless rate climbed to 4.5% from 4.4% (LS). It is the highest unemployment rate in nearly five years, and it supports the central bank's own view that the labour market is loosening after it raised rates at each of its first three meetings this year (BBG). One chief rates strategist said the September meeting still overprices the risk of a hike and that this print makes a September move very unlikely (BBG). Money markets cut the probability of an increase by December to 52% from 68% before the release (BBG). The Australian dollar fell 0.15% to 0.7114.
In currencies, the dollar index steadied at 98.86 after sliding on Wednesday to its lowest since May (BBG). The yen eased 0.31% to 158.66 as domestic bonds rallied and a twenty-year auction drew firmer demand than the twelve-month average (BBG). The euro traded at 1.1673 and sterling at 1.3606, while the won weakened 0.42% to 1,394.5 even as Korean equities surged. One currency strategist argued that buybacks signal policymakers leaning against further yield increases and that the relative-rate story supporting the dollar is fading (BBG).
In commodities, gold fell 0.71% to 4,483 after reaching its highest since early June (Reuters). Brent edged up 0.05% to 91.67 after Trump said there would be an unprecedented economic warfare operation against Iran, having faulted Tehran for failing to take its chance at a deal (BBG). He also warned of economic consequences for any country that continues to support Tehran (Reuters). Bloomberg reports that Iran is at risk of losing a key economic lifeline as the UAE halts trade with it (JapanTimes). Copper slipped 0.23%. Bitcoin rose 0.79% to 69,588 after a record volume of short positions was liquidated, with the White House pressing Congress on a crypto bill (BBG).
In corporate news, Marvell Technology agreed to give Alphabet's Google rights to buy as much as 12.2 billion dollars of its shares in exchange for purchasing chips (BBG). Estée Lauder's results beat estimates and ended a three-straight-quarter run of declines in annual revenue (BBG).
Data and the day ahead: Japan's July trade deficit came in at 634.5 billion yen, narrower than the 649.0 billion expected though wider than the revised 409.9 billion prior, with exports up 23.2% against 20.1% expected and imports up 27.8% against 25.1% (LS). China left both loan prime rates unchanged at 3.00% and 3.50% as expected (LS). Australian consumer inflation expectations rose to 4.9% from 4.7% (LS). Still to come: the Riksbank decision at 09:30 CET, where a hold at 1.75% is unanimous in the survey, and the whole event is the guidance, followed by its press conference at 11:00 CET, the account of the July ECB meeting at 13:30 CET, US weekly jobless claims and the Philadelphia Fed survey at 14:30 CET, and the ECB's Sleijpen at 21:30 CET. There is no Fed speaker scheduled.
Time Stamp: 20-08-2026, 08:10 CET