As U.S. long-term Treasury yields soared to their highest level in 19 years, Treasury Secretary Scott Vessen and the Department of the Treasury are reportedly taking steps to prevent further increases in rates.
On August 9, Bloomberg reported that Wall Street traders and market strategists view recent U.S. interventions to defend the yen, changes in Treasury issuance plans, and Vessen's support for Federal Reserve Chair Kevin Warsh as signals to curb the rise in long-term Treasury yields.
The yield on the 30-year Treasury bond reached 5.28% on July 31, marking the highest level since July 2007. An increase in long-term rates raises the likelihood of higher mortgage and corporate bond rates, increasing interest burdens for households and businesses.
Market analysts believe that the recent joint intervention by the U.S. and Japan to bolster the yen is also related to stabilizing the U.S. Treasury market. They suggest that Japan's potential sale of U.S. Treasuries to acquire dollars has diminished.
Vessen has proposed increasing the limits of the Federal Reserve's Foreign and International Monetary Authorities (FIMA) repo facility, which allows foreign central banks to deposit U.S. Treasuries with the Fed in exchange for dollars, enabling Japan to secure dollars without selling Treasuries.
Changes in the Treasury's issuance plans have also been noted. Last week, the Treasury announced adjustments to its quarterly issuance plans, changing the wording from 'increases' in future issuance to 'changes.'
While the Treasury has not explicitly stated it will reduce long-term bond issuance immediately, the market interprets this as a signal that it may cut back on long-term bond sales if necessary. A reduction in Treasury issuance could decrease the supply of bonds in the market, potentially alleviating upward pressure on yields.
Vessen's recent public support for Warsh is seen in the same context. Warsh emphasized the principle of price stability after the Federal Open Market Committee (FOMC) meeting on July 29 but did not provide specific signals on future rate movements. This led to increased market uncertainty and a sharp rise in long-term Treasury yields.
In a CNBC interview, Vessen stated, 'We need to move away from the practice of signaling the Fed's policy direction too far in advance,' defending Warsh.
However, some analysts caution that the Treasury's actions alone may not be sufficient to reverse the trend of rising long-term yields. Phoebe White, head of U.S. interest rate strategy at UBS, noted, 'The market impact of recent actions may be limited,' adding that the Treasury will show it is willing to use all available means to prevent further increases in long-term Treasury yields.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.