Wall Street Slips, Treasury Yields Rise Again Despite Expanded Buybacks
Wall Street closed lower in Thursday's trading (August 20) as US Treasury yields climbed again, despite the Treasury Department's earlier announcement of an expanded long-term bond buyback program. The Dow Jones fell approximately 602 points (1.1%), the S&P 500 declined 0.7%, and the Nasdaq Composite retreated 1.1%.
The heaviest pressure on the Dow came from Walmart shares, which slumped about 9%. Meanwhile, rising borrowing costs once again weighed on growth and technology stocks as investors began to question whether high yields might persist and disrupt the stock market's bullish momentum.
The 10-year Treasury yield rose more than 5 basis points to around 4.706%, climbing back above the levels seen prior to Wednesday's Treasury buyback announcement. The 30-year yield also increased by more than 5 basis points to approximately 5.251%, following a touch of near-two-decade highs earlier in the week.
The rise in yields suggests that the initial impact of the buyback policy is beginning to fade. The Treasury Department had previously stated it would at least double its buybacks of 10-, 20-, and 30-year Treasuries. Treasury Secretary Scott Bessent even raised the possibility that the scale of operations could exceed the previously announced US$4 billion.
However, some market participants remain skeptical about whether buybacks alone are sufficient to alleviate pressure on long-term bonds. Concerns regarding the massive fiscal deficit, government debt supply, energy inflation, and high corporate financing needs continue to drive investor demand for higher yields.
Newsmaker Analysis: The return of the 10-year yield above 4.70% signals that the market is not yet fully convinced of the Treasury buyback's effectiveness. As long as yields remain elevated, technology stocks and the Nasdaq index face potential downward pressure, given that their valuations are sensitive to the cost of capital. Conversely, a more consistent decline in yields is required before Wall Street can find the necessary momentum to resume its rally.
Source: Newsmaker.id
