The Ministry of Finance announced that it will double the size of government bond buybacks to support long-term government bonds.
“While this announcement may provide some short-term relief, we don’t think it fundamentally changes the long-term yield outlook,” said Tony Miano, global investment strategy analyst at Wells Fargo Investment Institute.
Bond prices around the world are under pressure due to soaring oil prices and concerns about rising inflation. This week, Japan’s 10-year bond yield hit a 30-year high. Germany’s 30-year bond yield has reached its highest level since 2011, while France’s 30-year bond rate has also reached its highest level since 2008.
“The main drivers of rising yields remain in place, including uncertainty around inflation, monetary policy and the trajectory of government debt,” he said. “Until investors have more clarity on these issues, risks to long-term Treasury yields will remain biased to the upside.”
The U.S. budget deficit surged to $432.3 billion in July, the highest monthly total since March 2021, bringing the year-to-date budget deficit to nearly $1.8 trillion. The interest paid to finance the roughly $40 trillion national debt has cost the federal government about $1.2 trillion this year.
— CNBC’s Sarah Min contributed to this report.
