The Treasury’s latest auction featured a sharp step-up in buybacks, with cash deployed tripling versus prior operations. The programme is tracking to spend $6bln in this auction to repurchase 10-to-20-year Treasuries, yet the market reaction has been muted. The 10-year yield rose to its highest level since October 2023, as higher oil prices fed inflation concerns and outweighed any limited downward pressure from the buybacks.
Inflation Data and Market Expectations
Attention then shifted to US inflation data. The latest PPI showed the fastest pace of producer price increases in three months, driven by surging energy costs, and it coincided with a move in market pricing for a Fed hike at the September meeting. Expectations rose from 61% to 70%, underlining how macro releases can dominate over balance-sheet operations in shaping rates and dollar dynamics.
