The bond market is defying the Scott Bessent-led U.S. Treasury as yields rallied even after the department tripled its long-term bond buyback operation to $6 billion, pushing the 10-year Treasury yield to its highest since November 2023.

Bond Market Fighting the Treasury

“The bond market is quite literally fighting the US Treasury as the Iran War continues,” the Kobeissi Letter said on X Wednesday.

The market commentator added that the 10-year yield is up roughly 15 basis points from pre-announcement levels and is nearing a 100-basis-point move since the Iran war began.

The buyback size has now escalated in stages, from doubling to “at least doubling” to tripling, and yields still rose despite each intervention.

Yields Retreat Slightly After the Spike

The 10-year Treasury yield climbed six basis points to 4.85% on Wednesday, as Brent crude rose above $100 a barrel, reviving inflation fears ahead of next week’s Fed meeting. At the time of writing, the yield fell slightly to 4.829%.

The market commentator said that the 10-year could climb above 5% by next week without an end to the conflict, adding that consumers, homebuyers and borrowers “are in for a rude awakening.”

The 2-year yield rose to 4.43% on the announcement, then fell to 4.417%, while the 30-year yield hit 5.30% before falling to 5.279%.

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Treasury Has Been Escalating Its Response

The Treasury first doubled its liquidity-support buybacks to a $4 billion maximum per operation in August.

On Wednesday, the Treasury set a $6 billion maximum for the Sept. 10 buyback operation of off-the-run notes and bonds, according to its preliminary announcement.

Traders are pricing in roughly a 60% probability of a 25-basis-point Fed rate hike at the Sept. 16 meeting, according to CME FedWatch data.

Price Action: The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) fell 0.57% to close at $81.73 on Wednesday and lost 0.06% in after-hours trading, while the iShares 7-10 Year Treasury Bond ETF (NASDAQ:IEF) closed 0.29% lower at $91.89 and fell 0.09% in extended trading.

The iShares 7-10 year Treasury Bond ETF has a Momentum score in the 21st percentile and a negative price trend across the short, medium, and long term.

See More: Top Momentum Stocks

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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