Treasuries-Yields fall as oil slides, buyback debate simmers

The 2-year note yield, which typically moves in step with Fed interest rate expectations, fell 3.64 basis points to 4.2%. The yield on benchmark U.S. 10-year notes fell 6.34 basis points to 4.641%. The yield curve between two- and 10-year notes flattened to 44 basis points. The Treasury saw good demand for a $69 billion sale of two-year notes on Tuesday, the first of $183 billion in short- and intermediate-dated debt being auctioned this week. The notes sold at a high yield of 4.204%, 0.4 of a basis point below where they traded ahead of the auction. Demand was close to its recent average at 2.6 times the amount of debt on offer. The U.S. government will also sell $70 billion in five-year notes on Wednesday and $44 billion in seven-year notes on Thursday. Investors are now looking ahead to Wednesday's Personal Consumption Expenditures data for July, which will offer the next read on whether price pressures are easing. Attention will then shift to Federal Reserve Chairman Kevin Warsh's speech on Friday at the central bank's Jackson Hole symposium for any signals that the Fed may be leaning toward a more hawkish stance on inflation. Traders will also watch to see if Warsh comments on Bessent's debt buyback plans. Warsh has advocated for a more minimal role for the Fed in markets, including through less forward guidance. Longer-dated Treasury yields fell on Tuesday as oil prices dropped to a one-week low and traders continued to weigh the implications of Treasury Secretary Scott Bessent's decision to expand Treasury buybacks. Oil prices fell about 4% as traders shrugged off the latest U.S. sanctions campaign against Iran, viewing economic pressure as posing less risk to oil supplies than a military escalation. “There continues to be this very heated rhetoric and escalation, but oil is still trading in a narrow range considering all that has happened in the last couple of months,” said Will Compernolle, macro strategist at FHN Financial. “It might just be that investors in energy markets have become desensitized to how the conflict is fluctuating.” Iran denounced expanded U.S. sanctions aimed at isolating its economy as an act of "gross lawlessness," expressing confidence that many countries would not join the pressure campaign. Meanwhile, traders continued to debate the Treasury's plan to at least double the size of its buybacks after Bessent said recent increases in longer-dated yields had gone too far. “There's very little evidence that Treasuries are oversold right now. And I think because those fundamentals are there to have yields at present levels, I don't think the Treasury can fight against it,” said Compernolle. Billionaire investor Stanley Druckenmiller said the move is eroding the Treasury market's credibility and squandering a window for meaningful debt reform.

Treasuries-Yields fall as oil slides, buyback debate simmers

Two-year auction draws solid demand

Investors focus on inflation data and Jackson Hole speech

Yields fall as oil prices slide and buyback debate continues

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