The US Treasury Department announced a significant increase in its bond buyback operations, planning to purchase $6 billion of longer-term government debt on Thursday—triple the size of its standard operation and above the previously indicated minimum of $4 billion per operation [2][4][6][7]. This move, aimed at supporting liquidity and the smooth functioning of the US government bond market, follows Treasury Secretary Scott Bessent’s August 19 announcement to at least double the normal amount of buybacks, with the latest operation focusing on 10-year and 20-year securities [4][6]. Despite these efforts, yields on US Treasuries rose: the benchmark 10-year yield climbed to 4.85%, its highest since November 2023, the 20-year to 5.31%, and the 30-year to 5.30% [2][4][6][7]. The market reaction suggests that the larger-than-usual buyback was insufficient to immediately reverse selling pressure on longer-dated US government debt [4][6][7].
Rising Treasury yields provided support to the US Dollar, with the US Dollar Index (DXY) rebounding to around 98.80–98.85 after earlier losses [2][4][7]. However, the Dow Jones Industrial Average fell roughly 440 points, trading under 52,400, as the market digested the implications of the Treasury’s actions and persistent concerns over the federal deficit, which is projected near $2.1 trillion for the fiscal year ending September 30 [6]. Foreign investors, including China and Norway’s sovereign fund, have reduced their holdings of US government debt, further influencing market dynamics [6].
In the currency markets, the Japanese Yen (JPY) continued to strengthen against the US Dollar, with USD/JPY trading around 153.50 after briefly falling below 153.00, its lowest level since February [2][3]. This Yen strength is attributed to expectations of a 25-basis-point Bank of Japan (BoJ) rate hike, fully priced in for the September 17–18 meeting, and the unwinding of Yen-funded carry trades [2][3]. Strategists at Scotiabank highlight that risks for the JPY remain tilted to the upside, with support for USD/JPY seen around 153 and resistance at 155 [2][3]. The recent rally in the Yen is seen as fundamentally driven by BoJ policy expectations rather than official intervention, despite the record ¥15.4 trillion (about $96.5 billion) spent by Japan on intervention between July 30 and August 26 [1].
US Treasury Secretary Scott Bessent made headlines by challenging traders to bet against his efforts to support the Yen, stating, “I am the house now,” and emphasizing his coordination with Tokyo and inside knowledge of the Bank of Japan’s next moves [1]. Bessent warned that a disorderly Yen could push up US Treasury yields, as Japan is the largest foreign holder of US government debt [1]. The coordinated US-Japan yen-buying operation on July 31, 2026, marked the first US yen intervention since 1998 [1].
Looking ahead, market participants are focused on upcoming US inflation data, with the Producer Price Index (PPI) due Thursday and the Consumer Price Index (CPI) on Friday, ahead of the Federal Reserve’s September 15–16 meeting. Markets price in a 60–63% chance of a 25-basis-point Fed rate hike, with the outcome likely to influence USD/JPY and broader market sentiment [2][5]. The BoJ’s rate decision on September 17–18 remains a key event for the Yen [2][3].
CONCLUSION
The US Treasury’s expanded bond buyback failed to stem the rise in long-term yields, supporting the US Dollar but weighing on equities. Meanwhile, the Japanese Yen continues to strengthen on expectations of BoJ tightening and recent intervention efforts. Market attention now turns to upcoming US inflation data and central bank meetings, which will be pivotal for currency and bond market direction.