Yields pull back from multi-year highs after Treasury Department says it will double government debt repurchase size

The Treasury Department said it will double the size of its government debt repurchases, lending support to longer-dated bonds.

“While the announcement may provide short-term relief, we do not believe it fundamentally changes the outlook for long-term yields,” said Tony Miano, global investment strategy analyst at Wells Fargo Investment Institute.

Bond prices around the world have been under pressure in part due to elevated oil prices and fears that inflation could increase. Japan’s 10-year bond yield reached its highest level in three decades this week. German 30-year bund yields hit their highest point since 2011, while rates on France’s 30-year bond reached the highest going back to 2008. 

“The key drivers behind rising yields, including uncertainty around inflation, monetary policy, and the trajectory of government debt, remain in place,” he added. “Until investors gain greater clarity on those issues, risks to long-term Treasury yields remain skewed to the upside.”

The U.S. fiscal deficit jumped to $432.3 billion in July, its highest monthly total since March 2021, pushing the year-to-date shortfall to nearly $1.8 trillion. Interest paid to finance the nearly $40 trillion national debt has cost the Federal government about $1.2 trillion this year. 

— CNBC’s Sarah Min contributed to this report.