Treasury Yields Climb as Bessent Doubles Down on Bond Buybacks

Long-term Treasury yields continued to rise despite the U.S. government carrying out a $6 billion bond buyback, as concerns over federal debt and elevated oil prices weighed on global bond markets.

The U.S. 10-year Treasury yield rose to 4.856% on Wednesday, reaching its highest point since October 2023 even after the Treasury Department said it would repurchase $6 billion worth of longer-dated government bonds.

The latest buyback covers Treasuries with maturities of 10 to 20 years and is designed to strengthen market liquidity while reducing upward pressure on long-term borrowing costs. Instead, yields moved higher following the announcement, with the 30-year Treasury yield topping 5.3% and moving closer to its August peak.

Rising Treasury yields are generally considered unfavorable for bitcoin and other risk-sensitive assets. The reasoning is that money invested in bitcoin cannot simultaneously earn the roughly 4%-5% returns available from longer-maturity U.S. government bonds.

That relationship is more relevant when stronger economic growth is responsible for pushing yields higher. Current market conditions, however, suggest that growth is not the primary driver.

Analysts previously told CoinDesk that Treasury buybacks may have limited ability to counter the forces driving yields upward. The growing federal debt and expectations for additional fiscal spending point to continued government bond issuance, factors that remain largely beyond Treasury Secretary Scott Bessent’s control. Buybacks also do little to resolve the underlying fiscal problem, with government spending continuing to expand.

Bond yields also moved higher in other major markets, including Europe and Japan, as investors remained focused on inflation risks, rising crude prices and questions surrounding the sustainability of government borrowing.

The latest $6 billion purchase comes after the Treasury said it planned to at least double the size of its long-term buybacks from the usual $2 billion level. Yields initially declined following that announcement before reversing course and moving significantly higher.

Through the program, the Treasury is buying back longer-maturity debt while continuing to raise funds through shorter-term borrowing. This reshapes the maturity composition of U.S. government debt but does not lower the government’s overall financing requirements.

The latest bond-market measures came after coordinated efforts by the United States and Japan aimed at supporting the Japanese yen.

Earlier this week, Treasury Secretary Scott Bessent challenged currency traders to bet against the intervention, saying, “I am the house now.” A stronger yen also benefits the U.S. government by reducing pressure on Japan to sell its holdings of U.S. Treasuries to fund additional currency-market intervention. Japan remains the largest foreign holder of U.S. government debt.

At the same time, WTI crude oil has climbed to roughly $97 a barrel, matching its May high. The surge in energy prices has raised concerns that inflation could remain elevated, potentially complicating the Federal Reserve’s policy decisions.

Despite the yen’s strong rebound, the U.S. Dollar Index remains close to 99, maintaining pressure on risk assets. Bitcoin has continued trading in a consolidation range around $78,000 after climbing sharply from roughly $63,000 in mid-August.

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