Bessent calls bond-buyback effort ‘successful’ as yields climb
Driven by renewed concerns about Saudi Arabia’s ability to export oil amid rising regional tensions, the global benchmark wholesale oil price climbed above $109 a barrel on Tuesday — up from about $86 at the end of August, according to BBC News reporting. The price jump is amplifying inflation fears that have helped push government bond yields higher around the world.
The benchmark 10-year US Treasury yield briefly touched 5.04% on Tuesday — its highest level since 2007 — before easing to 4.96% at the close of trading, according to BBC News reporting and Federal Reserve Bank of St. Louis data. Government bond yields have been rising globally for months, driven by worries that inflation caused by the oil price surge since the start of the US-Israel war with Iran will lead to higher interest rates, BBC News reported.
The US Treasury has been buying back bonds in an effort to drive yields down. Treasury Secretary Scott Bessent called the intervention “successful.”
Investors are anticipating the US Federal Reserve will raise interest rates to combat the inflation caused by higher oil prices. Higher interest rates and inflation tend to drive up the yields bond investors demand on government borrowing.
Competition for debt from artificial-intelligence firms is also driving up bond yields, BBC News reported.
Carol Schleif, chief market strategist at BMO Wealth Management, said bond markets had been signaling for weeks that higher interest rates may be needed. While the rise in borrowing costs has been “orderly” this year rather than sudden, she said rates could remain elevated if geopolitical tensions and high energy prices remain “front and center.”
Bond yields can also be a sign of how much faith investors have in a given government, with a higher yield reflecting less confidence.