Rabobank warns macro fundamentals and unpredictable issuance may drive yields higher despite temporary buyback relief.
The US Treasury’s surprise move to increase buybacks of longer-term bonds has only briefly stalled rising yields. Elevated inflation, widening budget deficits, and strong AI-driven investment demand remain unchanged, sustaining upward pressure on yields.
Prior to the announcement, yields had climbed steadily amid concerns over fiscal sustainability and Fed policy. The buyback program, funded by shifting from long-term to short-term debt, introduces volatility by making issuance less predictable, potentially increasing risk premiums.
Analysts suggest the strategy’s limited firepower and cost could ultimately force Federal Reserve intervention if yields continue to surge.