The effect of the U.S. Treasury bond repurchase boost is fading, long-term U.S. Treasury bonds are widening their decline, Nasdaq futures are down, spot gold has dropped 1% during the day, and oil prices are rising

Author: Long Yue, Zhang Yaqi, Wall Street Journal

The U.S. Treasury Department has launched a long-term Treasury bond incremental repurchase plan, briefly boosting market sentiment, but the effect quickly faded. Rising oil prices have brought inflation risks back into investors' view, leading to a decline in U.S. stock futures and a renewed rise in long-term bond yields.

On Thursday, before the U.S. stock market opened, the Nasdaq 100 index futures fell by 0.5%. Previously, storage chip stocks saw a broad rise, with SK Hynix up about 5%, SanDisk up about 3%, Western Digital up about 2%, Micron Technology up about 2%, and Seagate Technology up about 2%. SK Hynix and Samsung Electronics announced large-scale shareholder return plans, totaling up to 140 trillion won, directly igniting the South Korean stock market. The Nikkei 225 index closed up 1.4% at 66,216.79 points; the South Korean Seoul Composite Index closed up 5.9% at 6,852.58 points.

U.S. long-term bonds expanded their losses, with the 30-year Treasury yield rising 6 basis points to 5.25%. Bloomberg's index tracking U.S. Treasuries with maturities of 20 years or more rose 1.7% on Wednesday, marking the largest single-day increase since February 2025. Driven by this, bond prices in Japan, Australia, and New Zealand rose in tandem. Spot gold fell by 1.0% during the day, trading at $4,477.33 per ounce.

Jack McIntyre, portfolio manager at Brandywine Global Investment Management, stated, "This administration needs a victory, perhaps by artificially suppressing long-term Treasury yields." "The pessimism in the global long-end market is something I haven't seen in a long time; they must take action."

• Before the U.S. stock market opened, storage chip stocks saw a broad rise, with SK Hynix up about 5%, SanDisk up about 3%, Western Digital up about 2%, Micron Technology up about 2%, and Seagate Technology up about 2%.
• U.S. long-term bonds expanded their losses, with the 30-year Treasury yield rising 6 basis points to 5.25%.
• The U.S. dollar index rose slightly by 0.1% during the Asian trading session, having previously fallen by 0.8%, reaching its lowest level since May.
• The euro rose 0.1% against the dollar to 1.1687, the highest level since May 14.
• WTI crude oil rose 3% during the day, trading at $86.94 per barrel. Brent crude oil rose 2.6% during the day, trading at $94.10 per barrel.
• Spot gold fell by 1.0% during the day, trading at $4,477.33 per ounce.
• Spot silver fell by 1.0% during the day, trading at $66.3 per ounce.
• Bitcoin rose above $69,300.

Repurchase Scale Doubled, Treasury Aims at Long-Term Rates

The U.S. Treasury announced it would at least double the scale of long-term Treasury bond repurchases. This move aims to suppress long-term Treasury yields, which have recently risen to decades-high levels.

Earlier this week, long-term U.S. Treasury yields rose significantly. The 30-year yield reached its highest level since 2007; last week's 10-year Treasury auction was conducted at the highest financing cost since 2007, and the 30-year auction's yield set a new high since 2001.

Market participants have compared this repurchase operation to the Federal Reserve's "Operation Twist." The Treasury has not specified the exact source of the repurchase funds but typically relies on short-term Treasury bills to meet floating funding needs. If the authorities effectively replace long-term bonds with short-term bonds, this operation is mechanically similar to "Operation Twist."

Jack McIntyre, portfolio manager at Brandywine Global Investment Management, stated, "This administration needs a victory, perhaps by artificially suppressing long-term Treasury yields." "The pessimism in the global long-end market is something I haven't seen in a long time; they must take action."

Market Doubts Repurchase Effectiveness, Dollar Narrative Quietly Shifts

Despite a noticeable short-term improvement in market sentiment, several analysts remain cautious about the lasting effects of the repurchase policy.

Gerald Gan, Chief Investment Officer at Reed Capital, stated, "The repurchase plan makes me believe that the U.S. Treasury is extremely concerned about long-term borrowing costs. But like intervening in the yen exchange rate, this effect is temporary; the repurchase cannot last too long."

In the foreign exchange market, Bloomberg's dollar index rose slightly by 0.1% during the Asian trading session, having previously fallen by 0.8%, reaching its lowest level since May. The euro rose 0.1% against the dollar to 1.1687, the highest level since May 14.

Lloyd Chan, a foreign exchange strategist at MUFG Bank in Singapore, wrote in a research report, "The repurchase alone is unlikely to change the longer-term fundamentals, but it does signal that policymakers are inclined to resist further increases in yields. This means the relative interest rate logic that previously supported the dollar is fading."

Bloomberg market strategist Mark Cranfield also pointed out, "For investors weighing the Treasury repurchase against the ongoing expansion of the U.S. fiscal deficit, the dollar is becoming the weakest link, providing further room for Asian currencies to strengthen."

Underlying Causes of Bond Market Sell-off Remain, Divergence in Gold and Oil Trends

The deep-seated causes of the current bond market turmoil have not dissipated. Recently, the global bond market has come under pressure as investors demand higher compensation for inflation risks and rising government debt levels, while tensions in the Middle East further exacerbate price pressures; at the same time, companies are concentrating on issuing bonds to finance the artificial intelligence boom, amplifying the intensity of this sell-off.

In the commodities market, Brent crude rose 0.4% to about $92 per barrel. Trump previously stated that he would launch "unprecedented economic warfare" against Iran and accused Iran of missing the opportunity to reach an agreement with him, with geopolitical risk premiums supporting oil prices.

Gold, after rising to its highest level since early June, has retreated, falling 0.8% to about $4,480 per ounce. Bitcoin rose above $69,300, following Trump's meeting with cryptocurrency industry executives at the White House, urging Congress to push for the passage of related legislation.