Authors: Long Yue, Zhang Yaqi, Wall Street Insights

The U.S. Treasury Department has launched a long-term bond repurchase program, briefly boosting market sentiment, but the effect quickly faded. Rising oil prices have brought inflation risks back into the spotlight for investors, resulting in a decline in U.S. stock futures and a rise in long-term bond yields.

On Thursday, before the U.S. stock market opened, Nasdaq 100 futures dropped by 0.5%. Previously, shares in memory chip companies rose broadly, with SK Hynix up about 5%, SanDisk up about 3%, Western Digital up about 2%, Micron Technology up about 2%, and Seagate Technology up about 2%. SK Hynix and Samsung Electronics successively announced large-scale shareholder return plans totaling up to 140 trillion won, directly igniting the South Korean stock market. The Nikkei 225 index rose 1.4% to close at 66,216.79 points; South Korea's Seoul Composite Index rose 5.9% to close at 6,852.58 points.

U.S. long-term bonds widened their declines, with the 30-year Treasury yield rising 6 basis points to 5.25%. Bloomberg's index tracking U.S. Treasuries with maturities of 20 years or longer rose 1.7% in a single day on Wednesday, marking the largest single-day gain since February 2025. This drove up bond prices in Japan, Australia, and New Zealand simultaneously. Spot gold fell by 1.0% during the day, trading at $4,477.33 per ounce.

Jack McIntyre, portfolio manager at Brandywine Global Investment Management, said, "This government needs a victory, perhaps by suppressing long-term Treasury yields." "The pessimism in the global long end market is something I haven't seen in a long time; they must take action."

• Before the U.S. stock market opened, shares in memory chip companies rose broadly, with SK Hynix up about 5%, SanDisk up about 3%, Western Digital up about 2%, Micron Technology up about 2%, and Seagate Technology up about 2%.
• U.S. long-term bonds widened their declines, with the 30-year Treasury yield rising 6 basis points to 5.25%.
• The U.S. dollar index rose slightly by 0.1% during the Asian trading session, having fallen 0.8% the previous day, reaching its lowest level since May.
• The euro rose by 0.1% against the dollar to 1.1687, the highest level since May 14.
• WTI crude oil rose 3% during the day, trading at $86.94 per barrel. Brent crude oil rose 2.6%, trading at $94.10 per barrel.
• Spot gold fell by 1.0% during the day, trading at $4,477.33 per ounce.
• Spot silver fell by 1.0% during the day, trading at $66.3 per ounce.
• Bitcoin rose above $69,300.

The U.S. Treasury announced that it would at least double the scale of its long-term bond repurchases. This move aims to suppress long-term Treasury yields, which have recently climbed to multi-decade highs.

Earlier this week, long-term U.S. Treasury yields spiked significantly. The 30-year yield reached its highest level since 2007, and the previous week’s 10-year Treasury auction was completed at the highest financing cost since 2007, while the 30-year auction set a new high yield since 2001.

Market participants compare this repurchase operation to the Federal Reserve's "Operation Twist." The Treasury has not specified the sources of funding for the repurchases, but it typically relies on short-term Treasury bills to meet floating funding needs. If the authorities effectively replace long-term bonds with short-term bonds, this operation is mechanism-wise similar to "Operation Twist."

Jack McIntyre, portfolio manager at Brandywine Global Investment Management, said, "This government needs a victory, perhaps by suppressing long-term Treasury yields." "The pessimism in the global long end market is something I haven't seen in a long time; they must take action."

Although the market's short-term sentiment has clearly improved, several analysts remain cautious about the lasting effects of the repurchase policy.

Gerald Gan, Chief Investment Officer at Reed Capital, said, "The repurchase plan makes me believe the U.S. Treasury is extremely worried about long-term borrowing costs. But just like intervening in the yen exchange rate, the effect is temporary; the repurchase cannot last too long."

In the foreign exchange market, the Bloomberg U.S. dollar index rose slightly by 0.1% during the Asian trading session, having previously fallen 0.8% to its lowest level since May. The euro rose by 0.1% against the dollar to 1.1687, the highest level since May 14.

Lloyd Chan, foreign exchange strategist at MUFG Bank, wrote in a research report, "Simply relying on repurchases is unlikely to change the longer-term fundamentals, but it does signal that policymakers tend to resist further increases in yields. This means that the relative interest rate logic supporting the dollar is fading."

Mark Cranfield, a Bloomberg market strategist, also pointed out, "For investors weighing the bond repurchase against the continuing expansion of the U.S. fiscal deficit, the dollar is becoming the weakest link, creating further room for Asian currencies to strengthen."

The underlying drivers of the current turbulence in the bond market have not dissipated. Recently, the global bond market has come under pressure as investors seek higher compensation for inflation risks and rising government debt levels, while tensions in the Middle East further exacerbate price pressures; simultaneously, companies are intensively issuing bonds to finance the artificial intelligence boom, amplifying the intensity of this round of sell-off.

In the commodities market, Brent crude rose 0.4% to about $92 per barrel. Trump previously stated he would launch an "unprecedented economic war" against Iran and accused Iran of missing the opportunity to reach an agreement with him, which has supported oil prices due to geopolitical risk premiums.

Gold saw a decline after reaching the highest level since early June, falling 0.8% to about $4,480 per ounce. Bitcoin rose above $69,300 after Trump met with cryptocurrency industry executives at the White House and urged Congress to advance related legislation.

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