Stocks shrugged it off, but bond yields moved higher for a second straight day on Friday, the latest sign that the US Treasury's intervention efforts have been a bust.
The 30-year Treasury yield was up more than 2 basis points to nearly 5.28% in the afternoon, inching back toward the 5.3% level that spooked markets earlier this week, while the 10-year yield was more than 3 basis points higher, over 4.73%.
More from Yahoo Scout What factors are driving Treasury yields higher? How does $40 trillion debt impact buyback plans? How are Fed and Treasury working against each other? Why did Treasury's bond intervention efforts fail?
On Wednesday, the Treasury said it would "at least double" the amount of 10-year, 20-year, and 30-year Treasury bonds it buys back. A day later, Treasury Secretary Scott Bessent signaled he could expand the purchases further. The operation is set to begin on Sept. 9 and remain effective through Nov. 4.
Read more: How soaring Treasury yields could impact your finances
Bond market watchers have been skeptical that the Treasury's plan to lower yields by boosting long-dated bond buying would work. Multiple factors outside of the Treasury's control, including inflation fears, Federal Reserve communication changes, and a boom in corporate debt issuance, have contributed to higher yields.
"We believe these measures will struggle to offset either declining Fed credibility or rising rate expectations," BNP strategists led by Guneet Dhingra wrote in a note this week.
The intervention complicates the task facing Fed Chairman Kevin Warsh, who has suggested that he welcomes the higher yields as a way to raise borrowing costs and tighten policy through markets, rather than the Fed having to raise short-term rates itself.
"We have the Fed and the Treasury basically working in sort of opposite directions," Wilmington Trust senior bond portfolio manager Wil Stith told Yahoo Finance. "I think that's just going to require the Fed, which has the larger sandbox, to sort of adjust the target fed funds rate more so than it would have."
The Treasury Department also released data this week showing that the US national debt had topped $40 trillion, poor timing as it was trying to sell markets on its plan to issue new debt to buy back old debt.
"The Treasury Department is calling this a 'debt buyback.' But they're not reducing the debt. They're running huge deficits, buying back old bonds, and issuing even more new ones. This is debt reshuffling, not debt reduction," Charlie Bilello, chief market strategist at Creative Planning, posted on X.
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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