US 10-Year Yield Hits 5% Despite Treasury Buybacks
The 10-year Treasury yield reached 5% on September 18, defying the government's efforts to lower rates through increased debt buybacks.
Key points
- The 10-year Treasury yield hit 5% on September 18, up from below 4% in early 2024.
- Treasury buybacks totaling over $4 billion per month have failed to lower yields significantly.
- The average 30-year fixed mortgage rate stood at 6.95% on September 18, tracking the rising bond yields.
The 10-year Treasury yield reached 5% on September 18. This level marks a significant increase from the sub-4% range seen before late February. The rise occurred despite the Treasury's decision to double its long-bond buybacks to over $4 billion each.
Treasury Secretary Scott Bessent aims to suppress yields by purchasing more debt. However, this strategy fails to address the core driver of higher borrowing costs. Investors demand greater compensation because their dollars lose purchasing power faster than the government expects.
Buybacks Fail to Counter Inflation
A $6 billion operation announced on September 9 failed to stabilize the market. Oil prices surged during this period, adding pressure on yields. The $32 trillion bond market remained volatile despite the government's intervention attempts.
Strategists cited the growing budget deficit as a primary concern. Persistent inflation above target levels also drives demand for higher returns. Corporate borrowing remains high, further constraining the effectiveness of buyback programs.
Mortgage Rates Track Rising Yields
Mortgage rates closely follow the 10-year Treasury yield. Freddie Mac data shows the average 30-year fixed rate at 6.95%. This figure stood on September 18, reflecting the broader rise in borrowing costs.
Investors seeking lower capital costs face continued disappointment. The iShares 20+ Year Treasury Bond ETF reports a negative return. This decline of 3.2% this year highlights the difficulty of lowering rates.
