Yields snap back after Treasury's buyback surprise — why one advisor says the move isn't over yet

Treasury's move this week to double its bond buyback size was meant to calm a jittery market. It worked for about a day. By Thursday, yields were climbing again — and one advisor says that's exactly what should have investors' attention heading into next week's Jackson Hole symposium.

Geopolitics again impacted the U.S. economic landscape this week. Peace talks between the U.S. and Iran stalled, sending bond yields to multi-decade highs around the world. The breakdown of negotiations also sparked inflation fears and sent the price of oil above $94 a barrel.

In an attempt to stabilize the U.S. bond market, the Treasury Department said Wednesday that it is doubling the size of its government debt buybacks from $2 billion to at least $4 billion per operation. The surprise move is targeting the longer-dated nominal coupon securities, specifically the 10-year to 20-year sector and the 20-year to 30-year sector. “This increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors,” said the Treasury, in a statement.

The move fueled a pullback in bond yields, although CNBC reports that they rebounded Thursday, and are holding steady Friday.

Paul Stanley, managing director and founding advisor at wealth management firm Arca said that the move higher in bond yields in recent months has been “rather slow and orderly,” a pace has helped stocks digest the Treasury’s move. “Typically, higher bond yields make stocks less attractive, but we remind investors that the 10-year Treasury yield is still below its post-Covid high of roughly 4.9%, reached in the fall of 2023, so we think bond yields still have more runway to move higher before negatively affecting stocks,” he said, in a statement.

The 10-year Treasury yield is at 4.736% Friday evening.

Rather, Stanley feels that the rise in bond yields and the Treasury purchases set the stage for a “very important” speech from Fed Chair at the Jackson Hole Economic Policy Symposium next week. Warsh’s address will be his first since he assumed the Fed’s hotseat in May. It also gives him the opportunity to talk to markets, which are in need of more clarity on the central bank's plans, according to Arca. “It seems as though Warsh wants the market to do the tightening for the Fed, and that's really what is happening with the recent surge in bond yields,” he added.

“The bond yield surge is another brick in the market's wall of worry and ultimately, we believe the market will likely resume its focus on the promise of artificial intelligence and how companies are using this productivity to drive earnings,” Arca said. “We are in early innings in the AI story, and we expect corporate earnings to continue to benefit from AI.”

Speaking to reporters Wednesday President Donald Trump was asked whether Americans should be concerned about volatility in the bond market. “No, I don’t think so, because like I said, our country is doing so well despite interest rates,” he said, noting that interest rates are “artificially high.”

“I think we have a very powerful country and we’re powering through these ridiculous interest rates,” Trump added.

The Federal Reserve made its last rate cut in December 2025, but has since kept its policy rate steady at 3.5% to 3.75% despite pressure from Trump to lower rates.

Minutes from the Federal Open Market Committee's July meeting, released Wednesday, show a contingent of officials ready to push rates higher if inflation doesn't retreat toward the Fed's 2% target. 

Dean Lyulkin, CEO of small business lender Cardiff, notes that the July minutes were more hawkish than markets expected. "The sheer number of voting members ready to hike immediately tells us a September hike is on the table and futures still show a 40% chance of a hike next month," he told InvestmentNews. "But I still think the Fed will be poring over data given softer employment and consumer reports."

"Even if the Fed holds or eventually cuts the overnight rate because their read on inflation turns out to be overly aggressive, that doesn't guarantee lower 10- or 30-year Treasury yields," he added. "If economic growth is uninspiring while inflation stays above target, the bond market may continue demanding a higher premium to own long-duration debt regardless of exactly what the Fed does at the next meeting."

On Friday evening, the CME’s FedWatch tool puts the probability of rates being unchanged at 59.9% for September’s Fed meeting. A hike to between 3.75% and 4% has a likelihood of 40.1%, according to the tool, which updates in real time.