The Treasury’s plan to double buybacks for long-dated bonds pushes yields lower, weakening the dollar amid softer Fed rate hike bets.
The US Dollar Index (DXY) fell to 98.86, its lowest since late May, down 0.80% as Treasury yields declined sharply. The move followed the Treasury Department’s decision to at least double its liquidity-support buybacks for longer-dated securities, raising per-operation purchases from $2 billion to $4 billion in the 10-to-30-year maturity range.
Long-dated Treasury yields dropped, with the 10-year yield down over 5 basis points to 4.64% and the 30-year yield falling nearly 9 basis points to 5.19%. The 30-year yield had hit a 16-year high above 5.30% on Tuesday. The decline in yields reduced the attractiveness of US assets, pressuring the dollar further as markets scaled back expectations for a near-term Fed rate hike.
Uncertainty over the Fed’s policy path remains, however, as geopolitical risks and energy market volatility cloud the inflation outlook. Traders have not ruled out a potential rate hike later this year despite recent weak economic data.