US Treasury Bond Buybacks Spark Global Market Rally

Global stock markets recovered on August 20 after the U.S. Treasury Department announced it would at least double its planned purchases of longer-term Treasurys from September 9 through November 4. The intervention aimed to provide liquidity support and lower borrowing costs following a period of extreme volatility where 30-year bond yields hit their highest levels since 2007.

Prior to the announcement, Asian markets plummeted on August 19, with Seoul's Kospi dropping 5.80% and Japan's Nikkei falling 3.16%. This decline was driven by surging oil prices and geopolitical instability in the Strait of Hormuz, where a projectile strike hit a bulk carrier. President Donald Trump exacerbated market nerves by stating that no talks with Iran were scheduled and the U.S. naval blockade remained in force, while Iran vowed to keep the strait closed.

The Treasury's buyback plan successfully eased investor fears regarding inflation and government debt, triggering a rally across Seoul, Tokyo, Hong Kong, and Shanghai. In Seoul, the Kospi surged 6.1% on August 20. In the U.S., gains were further supported by strong corporate profit reports and positive cancer vaccine results from Moderna and Merck, which offset heavy selling in AI-related stocks. Despite the market recovery, oil prices remained elevated as U.S.-Iran negotiations showed little progress.