Treasuries Gain as Oil Drop Eases Pressure on Inflation, Bessent
Membership required
Membership is now required to use this feature. To learn more:
View Membership BenefitsTreasuries gained as a decline in crude oil eased inflation concerns and the pressure on Treasury Secretary Scott Bessent, who has been moving to halt a months-long selloff that pushed the longest-dated yields to the highest in almost two decades.
Yields fell by two to four basis points across the curve as oil dropped amid optimism about de-escalation in the Middle East. Yields on 30-year bonds have fallen about 9 basis points to 5.19% since Bessent announced plans last week to at least double Treasury buybacks in a bid to drag down long-term rates.
See more: Rising Yields May Create Opportunity Rather Than Signal a Bond Market Crisis
The surprise plan — announced just two weeks after the Treasury Department released its schedule for purchasing older bonds — provided some support to the market by promising to reduce the supply of long-term debt and indicating that the government was willing to intervene to keep yields from rising too far. But it also drew widespread criticism and is seen as unlikely to have a lasting impact, given that the rise in yields reflects elevated inflation and worries about the surging government debt.
The advance Tuesday reflects lower energy prices and “continued spillover from the Treasury Department actions to support bonds,” said Dan Carter, senior portfolio manager at Fort Washington Investment Advisors. “Buybacks certainly don’t address the long-term issues, but the signaling effect is important.”
Brent crude dropped over 3% after the New York Times reported that the US is preparing to send diplomats back to embassies in the Middle East. The move is seen as a signal that the Trump administration doesn’t anticipate a renewal of full-scale conflict with Iran as it shifts from military measures to threats of economic sanctions.
But oil prices remain above where they were when Trump launched the war in late February, which has fueled inflation concerns and added pressure to a bond market already besieged by a flood of supply from the government and tech companies rushing to raise funds to finance artificial-intelligence infrastructure.
Traders this week will watch auctions of five- and seven-year notes to gauge investor demand, as well as a key inflation report on Wednesday. Federal Reserve Chairman Kevin Warsh’s key address on Friday at the annual Jackson Hole symposium will cap the week.
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Bloomberg News provided this article. For more articles like this please visit bloomberg.com.
Membership required
Membership is now required to use this feature. To learn more:
View Membership BenefitsSponsored Content
Upcoming Virtual Events View All
