US bond yields rose Wednesday to their highest levels in almost three years after the Treasury Department said it would buy back up to $6 billion of government bonds, putting a dollar figure on the operation first announced last month.
The 10-year US Treasury yield rose to 4.84%, its highest closing level since October 2023. Yields moved higher after the Treasury Department’s announcement, signaling some skepticism from investors.
The Treasury Department on August 19 announced it would at least double the size of bond buybacks from September to November. The announcement on Wednesday pins the buybacks at up to $6 billion, triple the size of the standard $2 billion operation.
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The Treasury Department said the buybacks aim to provide support and help bond markets function smoothly. Buybacks can also help try to tame rising bond yields, which have climbed in recent weeks to multi-year highs.
Yields rise when bond prices fall. Investors have sold bonds this year, pushing prices lower and yields higher. The rise in yields is lifting borrowing costs for consumers and governments alike.
By increasing the size of buybacks, Treasury Secretary Scott Bessent is flexing the tools at his disposal at the Treasury Department to try and temper the rise in yields.
Buybacks can bring bonds off the market, pushing up prices and pushing yields lower. The buybacks, which target long-dated bonds like the 10-year, are set to take place on Thursday.
Yields moved higher after the Treasury announced the $6 billion figure, highlighting that investors weren’t satisfied. Some analysts expected the buyback figure to be larger, while others say buybacks aren’t enough to change the trajectory for yields.
“Markets may be telegraphing to Bessent that it will be tough for him to have meaningful control over long-end rates,” Padhraic Garvey, head of global rates and debt strategy at ING, told CNN in an email.
Bessent vs. bonds
Bond yields have surged this year, raising the cost of borrowing and exacerbating concerns about affordability. Yields have climbed across the globe as investors reckon with surging energy prices and potential central bank rate hikes.
A deluge of corporate debt to fund the AI buildout is also pushing up yields. And in the backdrop, rising government deficits and concerns over fiscal health are adding to the bond market uncertainty.
Buybacks from the Treasury Department are a standard operation in bond markets, but the size and timing of the announcement highlights the Trump administration’s sensitivity to the rise in yields.
While the buybacks can provide short-term relief, they don’t change the fundamentals contributing to higher yields, analysts say, from rising corporate debt issuance to lingering concerns about government deficits.
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The Treasury Department on Wednesday also had an auction for 10-year bonds. The auction saw strong demand from investors, signaling confidence in the market, according to Luis Alvarado, co-head of global fixed income strategy at Wells Fargo Investment Institute.
The auction saw its highest yield since 2007, Alvarado said, highlighting that investors are demanding more compensation to hold government debt but are still engaging with the market and buying. It also highlights how fundamentals like rising bond supply and rate-hike expectations are pushing yields higher.
Bond yields help set interest rates across the economy. The 10-year US Treasury yield is the benchmark for mortgage rates. As the 10-year yield has surged this year, mortgage rates have climbed. The average 30-year fixed mortgage rate rose last week to its highest level since July 2025.
A surge in bond yields can make life less affordable and compound concerns about the cost of living.
The rise in yields is a global phenomenon, with borrowing costs in Europe and Asia also hitting multi-year and multi-decade highs. Bond yields in France, Italy and the United Kingdom also surged on Wednesday.
“Treasury buybacks are unlikely to materially alter the diverse forces raising yields, including widening federal deficits, sticky inflation and increased global bond issuance,” Alvarado said in a note.
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