US Treasury Increases Bond Purchases to Curb Yield Rout

The United States Department of the Treasury intervened in the bond market on Wednesday to stop a rout that pushed U.S. Treasury yields to their highest levels since 2007. To stabilize the market, the department increased its capacity to purchase longer-term bonds from $2 billion to $4 billion per weekly operation.

This move followed an earlier intervention this month intended to reduce long-term yields and support the Japanese yen. While the Wednesday action briefly lowered yields, market volatility returned on Thursday. Investors reacted to a combination of mounting national debt, geopolitical instability, and inflation.

High-quality bonds have lost market value throughout the year as interest rates soared. Analyzing the broader trend, Capital Economics noted that while the sell-off in global government bond markets is significant, it does not yet amount to a crisis.