The US Treasury’s increased buyback of longer-dated bonds flattened the yield curve, pushing the 10-year yield down 10bp and lifting the euro.
EUR/USD climbed after the US Treasury raised buyback volumes for longer-dated Treasuries, flattening the bond curve and dragging the 10-year yield to 4.64%, 10 basis points below Tuesday’s peak. The move had limited spillover into European markets, where primary issuance remained active with strong SSA and covered bond deals.
The FOMC minutes from July revealed no major surprises, though participants diverged on inflation risks. Some policymakers suggested further tightening might be needed if inflation fails to decline, while others noted financial conditions may not be restrictive enough to hit the 2% target.
Euro area inflation held steady at 2.9% year-over-year in final July data, with core inflation at 2.5%. Underlying price pressures remained sticky but showed no significant rise post-energy shock, while the Q2 Labour Cost Index eased to 3.1% from 3.4% previously.