The US 10-year Treasury yield declines sharply on Wednesday, trading at 4.651% at the time of writing after reaching an intraday high of 4.712%.
The move follows a surprise announcement from the United States (US) Department of the Treasury that it will double the size of its liquidity-support buyback operations for longer-dated securities
The US Treasury says the size of buyback operations for nominal coupon securities in the 10-year to 20-year and 20-year to 30-year sectors will increase from $2 billion to at least $4 billion per operation. The changes will be effective from September 9 through November 4. The announcement follows a sharp increase in long-term borrowing costs, driven in part by concerns over government deficits, inflation and sovereign debt supply.
The reaction is particularly pronounced at the long end of the yield curve. The US 30-year Treasury yield falls sharply after reaching its highest level since 2007 on Tuesday. The decline spills over into the 10-year yield, suggesting investors welcome Washington’s willingness to intervene to ease strains in the bond market.