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US Treasuries rally as oil drop cools inflation fears
Yields fell about 5 to 7 basis points across the curve on Tuesday, with the 30-year yield down about 12 basis points to 5.16% since Treasury Secretary Scott Bessent’s longer-dated purchase plans were announced.
US Treasuries rallied on Tuesday as a sharp drop in oil prices helped ease inflation concerns, according to a report cited by Hedgeweek, citing Bloomberg. Yields fell by around 5 to 7 basis points across the curve as Brent crude dropped more than 4% and demand strengthened at a two-year note auction.
The rally also reflected a stronger-than-expected signal from the US Treasury’s surprise buyback programme, which is intended to reduce the supply of longer-dated debt and provide near-term support as yields rise. Since Bessent last week outlined plans to at least double government purchases of longer-dated Treasuries, the 30-year yield has fallen about 12 basis points to 5.16%.
Still, investors remain skeptical that buybacks can outweigh broader forces pushing yields higher, including elevated inflation and ongoing concerns around the US fiscal deficit and heavy government issuance. The report also points to expectations of de-escalation in the Middle East, after reports said the US would return diplomats to embassies in the region, though energy remains above pre-war levels.
Hedgeweek also notes that pressure on the Treasury market comes as the government faces heavy issuance and additional borrowing by technology companies funding AI infrastructure. Bessent has used lower 10-year Treasury yields as one measure of policy success, while the report says investors doubt the government can sustain control over yields over time.
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