10-Year Treasury Yield Tops 4.85% as Buybacks Fail

The 10-year Treasury yield rose 15 basis points following the announcement. It now stands above 4.85% for the first time since late 2023. This move signals strong demand for higher yields despite official intervention.

The US Treasury increased its long-term bond buyback program to $6 billion. This represents a tripling of previous purchase levels. Yields continued to climb immediately after the news was released.

Yields Rise Amid Ongoing Conflict

The 10-year yield is up nearly 100 basis points since the conflict in Iran began. The bond market is actively pushing back against the Treasury's actions. Investors are demanding higher compensation for holding US debt in this environment.

GN auto markets/bonds: bond market data shows a clear divergence between policy and price. The market is not yielding to the increased buybacks. Instead, it is pricing in significant risk premiums.

Japan Depletes FX Reserves Rapidly

Japan’s foreign exchange reserves fell by $94.6 billion in August. This marks the largest monthly decline on record. The drop represents an 8.7% reduction, bringing total reserves to $995 billion.

Ministry of Finance intervention to support the yen drove the losses. Reserves have declined by a cumulative $174 billion since May. US Treasury holdings fell by $87.8 billion in August alone to $840 billion.

Equity Market Hides Fragile Structure

The S&P 500 shows low six-month realized correlation at 0.11. This level has occurred only twice in the past 25 years. Traders are exploiting the spread by selling index volatility and buying single-stock volatility.

This structure creates a risk of sudden unwinding if stocks move in tandem. Nvidia’s four largest customers account for 44% of its revenue. The index appears calm only because stocks are moving in opposite directions.