Home›Forex›Major Pairs›Dollar softens as US Treasury expands long-term bond b…

Dollar softens as US Treasury expands long-term bond buybacks

MUFG said the Treasury’s Aug. 19 plan to at least double long-term bond buybacks triggered a dollar sell-off and lifted 30-year yields, with the 30-year yield up about 2 to 3 basis points since.

Reported · Written up by our desk · Major Pairs

The US dollar weakened over the summer as the US Treasury announced plans to at least double long-term bond buybacks, according to MUFG’s Lee Hardman as cited by FXStreet.

Hardman said the Aug. 19 announcement prompted a dollar sell-off and left the currency about 1% weaker, with confidence hit at a time when upside inflation risks are rising.

FXStreet reports that when details of the expanded program were revealed, the maximum size of the first larger buyback operation was tripled to USD 6 billion from USD 2 billion. Long-term yields initially jumped, with the 30-year yield rising by around 5 basis points before settling roughly 2 to 3 basis points higher.

MUFG also estimated that if the Treasury conducts nine buyback operations per quarter, purchasing up to USD 6 billion each time, annual purchases could total just over USD 200 billion, describing the effort as a smaller version of the Fed’s Operation Twist.

Hardman cautioned that it is highly uncertain how long the larger purchases will be sustained, and the size could increase further.

More like this

Sources