US Treasury repo operations provide only temporary relief, with market interventions raising new concerns

(1) After the U.S. Treasury announced on Wednesday the doubling of long-term Treasury buyback scale to at least $400 million per session, the 30-year yield briefly fell back, but rebounded again during the European session on Thursday, revealing that deep-seated pressures from inflation concerns and debt expansion have not faded, while the dollar also weakened under pressure. (2) Analysts pointed out that the $400 million buyback has more symbolic significance than substance in the $32 trillion market, acting more as a signal to the market that Treasury Secretary Besant remains vigilant about the rise in long-term rates. As mortgage rates are linked to long-term bonds, excessive financing costs will impact the most economically sensitive sectors. (3) Some investors are beginning to question whether, aside from the Federal Reserve, the Treasury is becoming a new variable impacting credit conditions. Previously, the U.S. Treasury had intervened in the foreign exchange market to influence the yen, and this round of bond market operations may blur the boundaries between monetary and fiscal policy. (4) JPMorgan believes that buybacks are unlikely to address the root causes driving yields higher, including unsustainable fiscal deficits and rising inflation expectations. Standard Chartered strategists also noted that the current yield increase is not caused by irrational markets, and regulatory intervention appears to be an active adjustment to the natural supply and demand outcome. (5) Globally, from Japan to Europe, long-term bond yields are generally at multi-year highs. The backdrop is the continued accumulation of debt as countries respond to crises, aging populations, and defense spending. Structural imbalances will continue to weigh on the bond market. Although market risk appetite has seen a brief recovery, medium-term concerns remain unresolved.