Treasuries-US yields resume rising despite Treasury's liquidity support

The yield on the benchmark U.S. 10-year Treasury note US10YT=RR was last up 4.5 basis points to 4.698%. The yield on the 30-year bond US30YT=RR rose 4.4 basis points to 5.238%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=TWEB, seen as an indicator of economic expectations, was at a positive 50.9 basis points. The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, rose 0.9 basis points to 4.188%. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) US5YTIP=TWEB was last at 2.338% after closing at 2.289% on Wednesday. The 10-year TIPS breakeven rate US10YTIP=TWEB was last at 2.345%, indicating the market sees inflation averaging about 2.3% a year for the next decade. In the early afternoon, the Treasury also auctioned off $9 billion in 30-year "inflation protected" Treasuries, which offer returns adjusted for inflation. The bid-to-cover ratio showed demand at 2.8 times supply, in keeping with recent trends. There was otherwise little economic data to move markets in late summer trading. The Labor Department reported that weekly first-time claims for unemployment benefits were in line with economists' expectations at just over 200,000. U.S. Treasury yields on Thursday erased some of the prior day's declines, returning to their upward trend despite fresh assurances from Treasury Secretary Bessent of liquidity support for long-dated notes and bonds, which followed the Treasury Department's Wednesday announcement of increased buybacks. The rise pointed to persistent pressure on long-term borrowing costs for the world's largest economy, with U.S. sovereign debt now surpassing $40 trillion for the first time. The U.S. Treasury Department on Wednesday said it would "at least" double the size of liquidity support buybacks for longer-dated Treasuries, which then saw sharp drops in yields on 10-year, 20-year and 30-year Treasuries, helping ease a global selloff in sovereigns. On Thursday, Bessent told CNBC the buybacks could be more than the $4 billion initially announced. Bond markets, however, were little moved, with yields remaining largely as they were. Meanwhile, U.S. President Donald Trump warned of "economic warfare" against any country that offers support to Iran as the United States seeks to resolve a war it launched in February along with Israel that has sent shocks through oil supply chains, driving up prices and putting upward pressure on inflation. Michael Lorizio, head of U.S. rates and mortgage trading at Manulife Investment Management, said that while Bessent's media appearance had not really moved markets, Thursday's upward movement in yields was likely more due to higher oil prices, which in turn can make investors anticipate upward pressure on inflation and increasing hawkishness among Federal Reserve policymakers. "It's going to probably take some time before we see how big of an impact it really does have," Lorizio said of the buyback support announced on Wednesday, adding that economic fundamentals were more important market drivers than signals from the Treasury or the latest headlines. "Despite the selloff, you're not seeing any abandonment of Treasuries by any means. That's what's kept this from feeling too much like an emergency," Lorizio said.

Treasuries-US yields resume rising despite Treasury's liquidity support

Key Treasury yields and inflation measures

Yields rise again after Treasury buyback support

Oil prices and inflation concerns weigh on markets

30-year TIPS auction meets recent demand trend

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