US Treasury Yields Weaken as Oil Prices Stay Elevated Ahead of Buyback Details

U.S. Treasury prices fell as traders worried that higher oil prices would intensify inflation and add pressure on the Federal Reserve to raise rates further. According to Sina Finance, the U.S. two-year Treasury yield briefly rose 3 basis points to 4.42%, its highest level since July 2024, while the 10-year yield hovered near 4.81%, close to last week’s three-year high. Brent crude rose above $100 a barrel for the first time since July as tensions in the Middle East escalated again. U.S. Treasury Secretary Scott Bessent will later announce how aggressively he is initially willing to act on expanding the Treasury buyback program to curb rising Treasury yields. Evelyne Gomez-Liechti, multi-asset strategist at Mizuho International, said the longer high oil prices persist, the harder it will be for markets to ignore the resulting inflation pressure. She added that as long as energy prices remain strong, it will be difficult for markets to sustain a meaningful rebound. Swap markets showed about a 62% probability that the Federal Reserve will raise rates by 25 basis points next week, up from 60% on Tuesday. Traders expect the Fed to deliver a total of two to three rate hikes by mid-2027. The U.S. Treasury plans to release the revised size of Thursday’s 10-year to 20-year Treasury buyback at 11:00 a.m. Washington time. The operation was originally set at $2 billion, then expanded, with the Treasury saying the buyback size would at least double and strategists guessing it could reach as much as $10 billion. Investors were reluctant to bet in advance on further increases in Treasury yields because the size of the expansion remained uncertain. The U.S. Treasury will also sell $39 billion of 10-year notes later in the day.