The US Treasury's announcement to increase buybacks of long-dated bonds from $2 billion to $4 billion sparked a brief recovery in the bond market, but the relief was short-lived as long-end yields reversed the move. The 10-year note finished around 4.70%, above its pre-announcement level, and the 30-year ended near 5.25%, marking its highest in almost two decades earlier in the week [3]. Treasury Secretary stated that the operations could run past $4 billion per issue and argued that yields do not reflect underlying fundamentals, citing impaired liquidity and the Iran conflict as temporary distortions [3]. However, yields resumed climbing after his remarks, and sell-side commentary dismissed the buyback plan as a thin imitation of Operation Twist, noting that $4 billion per operation is not a meaningful share of a market where federal debt surpassed $40 trillion [3].
The Dow Jones Industrial Average closed just beneath 52,800, down 687 points and 1.29% on the day, falling below the 53,000 handle for the first time this month [3]. Consumer staples led the market lower, with Walmart dropping more than 9%, its steepest single-session decline in over four years, after US store sales rose 2.6% against a 3.8% consensus and ticket growth slowed to 1.1% from 3.1% a year earlier [3]. Despite beating earnings and raising annual sales and profit targets, Walmart's results were flattered by tariff refunds rather than demand, and the market sold the stock anyway [3].
The US Dollar Index (DXY) rose 0.10% to 98.84, supported by stronger US Treasury yields, which capped the Euro's advance past 1.1700 and kept EUR/USD steady below that level [2]. US jobs data showed jobless claims for the week ending August 15 at 206K, better than expected and below the previous print of 212K [2]. Minutes from the Fed's July meeting revealed deepening concern about inflation, with several policymakers ready to raise rates if inflation does not decline toward 2%. The swaps market priced in a 35% chance of a rate hike in September and 64% for December [2].
In the Eurozone, Germany’s Producer Price Index (PPI) for July rose from -0.3% to 1.1% MoM and from 1.8% to 3% YoY, exceeding forecasts of 2.7% [2]. Attention now turns to tomorrow's Flash PMIs data for France, Germany, the Eurozone, and the United States [2].
The Japanese Yen, meanwhile, traded near 159.00 against the US Dollar, 0.5% higher on the day, having recovered close to four Yen from the coordinated intervention earlier in the month, which saw the Ministry of Finance and the US Treasury buy Yen in the first such operation since 1998, with a single day's spending estimated near $37 billion [1]. July trade figures showed imports rose 27.8% YoY against a 26.5% forecast, exports 23.2% against 19.9%, and the merchandise trade deficit widened to nearly 635 billion Yen from 410 billion the month before [1].
CONCLUSION
The US Treasury's expanded bond buyback plan failed to sustain market confidence, as yields climbed and the Dow Jones posted a sharp decline. The US Dollar strengthened on rising yields, limiting gains for the Euro, while Walmart's disappointing sales growth contributed to broader market losses. With inflation concerns persisting and upcoming economic data releases, market volatility remains elevated.