The U.S. 10-year Treasury yield climbed to 4.856% on Wednesday, its highest level since October 2023, despite the Treasury Department’s announcement that it would repurchase $6 billion of long-dated government debt.
The buyback, which targets Treasuries maturing in 10 to 20 years, is intended to improve market liquidity and ease upward pressure on long-term borrowing costs. But the announcement had the opposite of its intended effect: Treasury yields continued to rise, with the 30-year yield climbing above 5.3% and approaching its August high.
Higher bond yields are typically seen as a headwind for assets like bitcoin. The logic is simple: every dollar invested in bitcoin is a dollar not earning the 4%-5% yield offered by longer-duration Treasury notes.
However, that’s mostly applicable when economic growth is driving yields higher. Right now that’s not the case.
Analysts have previously told CoinDesk that bond buybacks may not work as forces pushing yields higher, mainly because the burgeoning federal debt and more fiscal spending, implying more bond auctions ahead, are largely out of Bessent’s control. Moreover, buybacks do not address the structural issue - government spending is out of control.
Yields also rose across other major bond markets, including Europe and Japan, as investors remained concerned about inflation, higher oil prices and the sustainability of government borrowing.
The latest $6 billion operation follows the Treasury’s original announcement that it would at least double its long-duration buybacks from their typical $2 billion size. Yields initially fell after that announcement but later reversed sharply higher.
The Treasury is effectively repurchasing longer-dated bonds while continuing to finance itself at the front end of the yield curve. That changes the maturity profile of the government’s debt but does not reduce its overall borrowing needs.
The bond-market intervention followed earlier coordinated action by the U.S. and Japan to support the Japanese yen.
Earlier this week, Treasury Secretary Scott Bessent challenged currency traders to bet against the intervention, declaring, “I am the house now.” A stronger yen is also in the U.S. government’s interest because it reduces the pressure on Japan to sell U.S. Treasuries to finance further currency intervention. Japan is the largest foreign holder of U.S. government debt.
Alongside rising Treasury yields, WTI crude has climbed to around $97 a barrel, matching its May high. The increase has added to concerns that higher energy costs could keep inflation elevated, making the Federal Reserve’s job more difficult.
Despite the yen’s sharp recovery, the U.S. Dollar Index remains near 99, keeping pressure on risk assets. Bitcoin has continued to consolidate around $78,000 after surging from approximately $63,000 in mid-August.