Treasury Doubles Buybacks, Yields Fall
The Treasury, led by Scott Bessent, said it is doubling the size of its liquidity support buyback operations for long-dated nominal coupon securities, from a top of $2 billion to at least $4 billion per operation. It is targeting longer-dated coupon securities in the 10-to-20 year and 20-to-30 year ranges.
The market reacted around 7:30 Chicago time, 8:30 Eastern. Ten-year yields broke sharply lower, and the 10-year bond yield sat at 4.66%. The dollar followed, which matters for the US and yen. Crude oil slipped a bit. Stocks turned bullish, since the US is working through the securities market via the Treasury to push yields down.
A day earlier the story was global bond yields moving higher - some at the highest point since 2007 - along with rises in Germany, France, and Japan, which pressured markets. This buyback is one of the tools the government has to change that picture.
Iran, UAE, and US Pressure
Oil traded at $85.24, up a touch. The economic isolation of Iran continues. The United Arab Emirates cut off all trade with Iran. It was surprising they had any trade, but they did, and the UAE had been a key trading partner that Iran used to get around US and allied sanctions, so removing it is a big step. Bessent had said the Treasury would start putting economic pressure on Iran, and this fits that plan - economic pressure rather than military.
Iran is lashing out, threatening to bomb potential US sites in Europe. The rhetoric has not cooled. Trump said the day before that no talks are underway and that the strait is open, contradicting what Iran had said. Things looked calmer than the previous day.
Fed Minutes Ahead
Fed minutes come at 2:00 p.m. Eastern and tend to move the market. Watch points: the hawkish dissent from the 9-to-3 vote, details on inflation and CPI data, and how Kevin Warsh changes Fed communication. A Jackson Hole speech by Warsh falls between August 27 and 29, followed by a September meeting. Rate-move probabilities have dipped since the last inflation data.
Moderna and Merck Melanoma Data
Moderna (MRNA) jumped 77% in the morning, ran to almost 100% higher, and stood up 88%, on positive phase three results from a skin cancer (melanoma) vaccine trial run with Merck (MRK). Merck, which already has Keytruda and prior positive results, was up about $10. The vaccine kept patients away from cancer for longer, a statistically significant result that made a real difference.
