Global yields retrench from multi-decade peaks after U.S. Treasury buybacks

The turnaround in global duration follows a surprise liquidity intervention by the U.S. Department of the Treasury on Wednesday, where Washington announced it would at least double its buyback operations for 10-year to 30-year nominal paper to $4 billion per session.

The expansion provided a guaranteed backstop for off-the-run debt, quelling a panic driven by expanding G10 fiscal deficits and escalating energy supply threats in the Persian Gulf.

While long-dated paper rebounded across major hubs, short-end yields remained under structural pressure as hawkish policy minutes from the Federal Reserve and sticky European inflation data reinforced expectations that central banks will keep interest rates restrictive into autumn.

JGBs lead global rally following U.S. buyback backstop

Asian sovereign debt anchored the global relief rally, led by a sharp recovery in Japanese Government Bonds (JGBs).

The benchmark 10-year JGB yield plunged from 2.896% to 2.842% - marking its biggest single-day rally since July 14 and pulling back decisively from a 30-year high of 2.945% touched earlier in the week.

The rally in Japanese paper mirrored an overnight drop in U.S. Treasuries, where 10-year yields fell sharply to 4.647% and 30-year yields tumbled to 5.198% in response to the U.S. buyback expansion.

However, Japanese bond desks remain on high alert. Growing expectations that the Bank of Japan could deliver a rate hike as soon as September, combined with fiscal uncertainty surrounding consumption tax proposals and a widening July trade deficit driven by record crude imports, continue to limit the scope for a prolonged JGB rally.

German curve bear-flattens on short-end stress

Germany’s benchmark 10-year Bund yield eased to 3.251%, snapping a four-day losing streak and pulling back from a 15-year high of 3.272% touched during Tuesday’s selloff.

In France, the 10-year OAT yield similarly eased for the first time in five sessions, falling to 4.102% after flirting with its highest levels since November 2008.

Conversely, the rate-sensitive German two-year Schatz yield rose for a fifth consecutive session to 2.53%, locking in its longest yield-gaining streak since August 2025.

The relentless pressure on short-dated European yields reflects market pricing for an increasingly hawkish European Central Bank. With Eurozone inflation holding near 3% and swap markets pricing in high odds of a 25-basis-point ECB rate hike next month, traders are reluctant to hold short-duration debt.

Persian Gulf transit drag sustains term premium

Despite the Treasury-led stabilization in long-dated yields, fixed-income strategists warn that the structural term premium demanded by bondholders will remain elevated while energy supply channels remain disrupted.

With Brent crude holding above $91 a barrel amid ongoing uncertainty over commercial transit through the Strait of Hormuz, shipping data from Kpler confirms that daily commodity vessel traffic remains depressed.

As long as physical energy flows through the Persian Gulf remain constrained, fixed-income desks view the pullback in long-end yields as a tactical breather rather than a structural reversal.

Global traders now pivot to Fed Chair Kevin Warsh’s upcoming address at the Jackson Hole Symposium for guidance on how central banks plan to manage lingering cost-push inflation alongside volatile sovereign debt markets.