Aug. 19, 2026, 10:09 AM EDT / Updated Aug. 19, 2026, 2:45 PM EDT
By Steve Kopack
Longer-term U.S. Treasury yields dropped sharply Wednesday after the Treasury Department announced that it would increase the size of its government debt repurchases by “at least double” in a surprise move
The yield on the 30-year Treasury bond plunged from 5.26% to as low as 5.18%. The 10-year yield, which has a heavy hand in steering consumer borrowing rates, was less impacted by the announcement but still dropped from 4.68% to as low as 4.63%
However, by early afternoon, the 10-year yield was only barely lower than it was before the announcement. Meanwhile, longer term bond yields still remained near their lowest levels of the day
U.S. stocks also traded higher but faded as the day went on. By 2 p.m. ET, the S&P 500 had risen 0.4% and the Nasdaq Composite was up 0.2%
In effect, the Treasury Department’s announcement means the agency will be stepping in as a larger buyer of longer-term bonds, which have been selling off
Wednesday’s announcement abruptly altered the “tentative buyback schedule” Treasury had released just two weeks ago, an unusual shift. The change will take effect on Sept. 9, the agency said
The 30-year Treasury yield hit its highest level since 2007on Aug. 13, serving only to compound the already soaring interest costs the federal government pays on the massive national debt
On Wednesday, the Treasury Department auctioned 20-year debt at the second-highest yield since the bond was introduced in 2020
When bonds fall, their yields rise and consumer interest rates follow
The announcement appears to be the latest effort by Secretary Scott Bessent to keep a lid on rates, which have been soaring this year
Earlier this summer, the Treasury Department, along with Japan’s finance ministry, intervened to bolster the sliding Japanese yen. Instead of using U.S. dollars to buy more yen, however, the Treasury sold euros and used that money to buy the yen. This move — which reportedly caught the European Central Bank by surprise — may have been intended to dissuade Japan from selling some of the trillions of dollars in U.S. Treasury bonds it holds, which would have further driven up yields
The broader move higher in rates this summer accelerated after Fed chairman Kevin Warsh’s most recent press conference on July 29
The Fed has “a credibility problem,” wrote KPMG chief economist Diane Swonk in an Aug. 11 note
Warsh offered little guidance, causing the bond market to begin second-guessing the Fed’s inflation fighting resolve despite continued geopolitical tensions, trade wars and a surge in energy prices stemming from the war with Iran and the Russian invasion of Ukraine
Since the war with Iran began at the end of February, surging energy prices have driven bond yields higher, especially longer-dated yields, as investors bet on higher inflation for longer
Crude oil prices are 50% higher than they were at the start of the year, while the cost of gas domestically has risen 37% since the war started. As of Wednesday, the national average price for a gallon of unleaded gas was $4.08
Following Wednesday’s Treasury announcement, some investors and market-watchers were skeptical that the move would have any lasting impact
“The market reaction suggests that this is an important tactical move from the Treasury,” said Jim Bullard, former president of the Federal Reserve Bank of St. Louis. “A little bit unexpected,” he said on Bloomberg TV
“I don’t think it changes the fundamentals of big fiscal deficits and a Fed on the sidelines,” Bullard added, “which is what’s driving longer-term yields higher.”
Economist Mohamed El-Erian said that Treasury’s announcement could help bring down mortgage rates in the “short term,” but it also “risks collateral damage and unintended consequences.”
“The effects of this financial engineering are short dated unless followed by fundamental policy adjustments,” El-Erian wrote on X
“We’re still issuing an enormous amount of debt,” Swonk told NBC News on Wednesday. She noted that the size of the federal government’s debt “has eclipsed the size of the U.S. economy for the first time since World War II, and interest expense is soaring.”
So far this fiscal year, that interest expense is nearly $1.2 trillion
The Federal Reserve has kept rates unchanged this year, unlike central banks in Europe and Japan, which have raised rates in order to try to slow inflation
“This is NOT a debt paydown,” Peter Boockvar of One Point BFG Wealth said of Wednesday’s buyback announcement. “It is just a rearrangement of the maturity schedule of Treasuries.”
Last year, during a similar Treasury bond sell off, Bessent told Bloomberg News that if needed, he had “a big toolkit that we can roll out,” that included increased government debt repurchases
