Disappointment over Bessent’s Buyback Plan Sends Oil Toward $100, U.S. Treasury Yields Soar

【Financial News New York = Reporter Lee Byung-chul】 U.S. Treasury yields surged on the long end on the 9th (local time) after the U.S. Department of the Treasury announced a Treasury buyback program that fell short of market expectations. With international oil prices driven by tensions in the Middle East breaking above $100 per barrel and inflation concerns mounting, Treasury selling intensified after even U.S. Treasury Secretary Scott Bessent’s effort to stabilize the bond market failed to meet expectations.
The 10-year Treasury yield broke above 4.85% intraday, reaching its highest level since November 2023. The 30-year yield also jumped to 5.31%, surpassing the closely watched 5.3% threshold. The 2-year yield, which is sensitive to the Federal Reserve System (Fed)’s short-term monetary policy outlook, rose 8 basis points (1 bp = 0.01 percentage point) to 4.43%.

The Treasury Department’s buyback announcement was the direct catalyst for the rise in Treasury yields that day.
The Treasury Department said on the 9th that it would purchase up to $6 billion of Treasury securities with maturities of 10 to 20 years through a buyback scheduled for the 10th. That was 1.5 times the minimum $4 billion announced last month. The Treasury Department had said last month that it would expand its long-term bond buyback program to at least $4 billion.
Although the amount was aggressive in absolute terms, the problem was that market expectations were even higher. According to Reuters, some market participants expected the Treasury Department to purchase $8 billion-$10 billion of Treasuries. Once the $6 billion figure was disclosed, Treasury prices instead fell and yields rose.
According to CNBC, Mizuho Securities assessed that “the buyback amount announced by the Treasury Department was smaller than expected,” adding that, from investors’ perspective, the scale was smaller than feared.
Mizuho Securities specifically said that Scott Bessent faced an “uphill battle” in bringing down long-term yields. The broader market trend, driven by fundamentals such as the U.S. economy and inflation, is moving toward higher yields, making it difficult for Bessent to push against that trend and lower rates.
Indeed, after the Treasury Department’s announcement, the 10-year yield climbed as high as 4.8528% intraday.

However, disappointment over the buyback alone does not fully explain the day’s rise in yields. The key factor that had been weighing on the Treasury market even before the announcement was international oil prices.
As military tensions in the Middle East escalated again, Brent crude, the benchmark for international oil prices, rose above $100 per barrel that day. It was the first time in six weeks that Brent crude had broken above $100. Concerns over disruptions to crude supplies stemming from the war with Iran were compounded by an attack by Houthi rebels on energy facilities in Saudi Arabia, reigniting concerns about supply disruptions from the Middle East.
U.S. President Donald Trump also said that the war with Iran would not end before the midterm elections, suggesting that oil prices are likely to continue rising for the time being. Speaking to reporters that day, President Trump said, “Oil prices will plunge as soon as the midterm elections are over,” adding, “I expect gasoline prices to fall below $2 per gallon. I think it will take a little longer than the midterm elections.”
The problem is that a sharp rise in oil prices could affect the Fed’s monetary policy. If higher oil prices feed through into gasoline prices and transportation and manufacturing costs, they could push consumer prices higher again. This would not only make it more difficult for the Fed to cut rates but also increase the need for additional rate hikes.
Reuters analyzed that if oil prices above $100 per barrel persist, rising transportation and manufacturing costs could revive inflation concerns and increase the likelihood that interest rates will remain elevated for longer.
The market is rapidly raising its expectations for a rate hike ahead of next week’s Federal Open Market Committee (FOMC) meeting. According to Reuters, markets are pricing in about a 60% chance of a Fed rate hike next week.
More fundamentally, the United States’ massive fiscal deficit and national debt are also factors pushing up long-term yields.
As the U.S. economy continues to grow more strongly than expected and inflationary pressures remain difficult to contain, the burden of Treasury supply continues to grow, with the national debt exceeding $40 trillion. A new inflationary factor has also emerged in the form of surging international oil prices.
Ultimately, analysts say that even if Bessent artificially increases demand for Treasuries through buybacks, it will be difficult to reverse the market’s broader trends: “strong growth and high oil prices → inflationary pressure → the Fed keeping rates high for longer” and “widening fiscal deficits → increased Treasury supply.”

[email protected] Reporter Lee Byung-chul Reporter