10-year US Treasury yield hits three-year high

The yield on the 10-year US Treasury note rose above 4.85 percent on Wednesday, its highest level in three years, after a $6 billion government bond buyback disappointed investors who had expected a larger intervention.

Yields also climbed on the 30-year Treasury bond after the Treasury Department said it was tripling buybacks of long-term Treasury bonds to $6 billion. The move was part of a strategy announced last month by Treasury Secretary Scott Bessent to calm the bond market.

Financial commentator Stephen Innes wrote that bond market insiders had thought the buyback could reach $10 billion or more, based on Bessent's comments. He said the $6 billion figure was near the lower end of market expectations.

Higher borrowing costs can weigh on economic growth and equity prices. The rise in yields came as Brent oil prices moved above $100 a barrel for the first time since late July amid escalations in the US-Iran war.

The Treasury Department announced last month that it would at least double government bond buybacks under a program intended to support market liquidity, after the yield on the 30-year bond rose to near two-decade highs in August. Bessent told CNBC on August 20 that the rise in yields had been worsened by thin summer trading and did not reflect underlying fundamentals.

Some finance figures have criticised the plan. Stanley Druckenmiller wrote in a Wall Street Journal opinion piece last month that markets aggregate information and that prices deliver that information to decision makers.

Analysts have linked higher yields to several factors, including high oil prices, expensive artificial intelligence investment and heavy US government issuance tied to the deficit. Futures markets have raised the odds of a Federal Reserve interest rate increase as oil prices and yields rose, with wholesale and consumer inflation data due in the next two days.