As we start a new weeks, the upward pressure on long-end bond yields from last week has shown initial signs of easing. Indeed, the 30yr Treasury yield is down -5bps overnight to 5.22%, whilst the 10yr yield is down by the same amount to 4.69%. That’s been supported by an announcement by the Treasury to CNBC that some/all of the cash in the Treasury General Account may be used to fund buybacks (bringin the US ever closer to Yield Curve Control and a new QE, much to Kevin Warsh's horror) and by a pullback in oil prices, with Brent crude oil finally reversing course after a run of 6 consecutive gains to trade at $93.10/bbl.
That pullback in Treasury yields this morning follows last week’s surprise announcement that the US Treasury will increase its buyback operations for longer-dated Treasuries. That briefly eased the pressure on yields when it was announced, with the 30yr yield down -9.2bps on Wednesday to 5.19%, after reaching a post-2007 high of 5.31% last Monday. But even with that intervention, yields then crept back up into the weekend, with the 30yr yield closing at 5.27% on Friday, less than 4bps beneath its closing peak earlier in the week. Moreover, investor concern about wider financial repression led to clear effects in other asset classes, with the dollar index down -0.87% last week, whilst gold rose +5.18%. And this morning, gold is up another +0.72% to a 3-month high of $4,636/oz.
One reason why yields moved higher into the weekend was the ongoing rise in oil prices last week, which added to fears about inflation. Indeed, if we look at the oil futures curve, it’s clear that markets are starting to price in a longer closure of the Strait of Hormuz again. For instance, the 12-month Brent future hit a 2-month high of $79.16/bbl on Friday, which isn’t far off its peak in the Iran conflict of $83.58/bbl back in May. So those expectations of
