Global Bond Yields Turn Lower With Oil Prices as Investors Mull Buybacks, Iran Sanctions — Update

By Emese Bartha

Yields on U.S. Treasurys and European government bonds turned lower as oil prices extended their falls, while investors weighed prospects of the Treasury buying back more long-dated bonds and the government's measures designed to isolate Iran economically.

CNBC reported Monday that the Treasury might deploy its nearly $1 trillion general account to finance the increased buybacks of long-end securities it announced last week. Last week, the Treasury doubled its buyback of long-end securities to more than $4 billion per operation from $2 billion.

The potential for employing the Treasury's general account highlights that Treasury Secretary Scott Bessent "has more tools to control the long end of the curve and the Treasury can come up with more creative measures," Jefferies economist Mohit Kumar said in a note.

However, higher deficits and risks of prolonged inflation keep Jefferies wary of buying long-dated Treasurys, Kumar said.

"[The] Treasury can further reassure markets by limiting increases in long-bond issuance and relying more heavily on bills," YCC Capital Research analysts said in a note. "Mechanically, this reduces the amount of duration the private sector must absorb."

However, the cleanest medium-term way to reduce Treasury term premium--the additional yield premium investors demand to hold a long-dated bond rather than a shorter one--is tighter fiscal policy, YCC Capital Research said.

Investors were also cautious ahead of the Federal Reserve Bank of Kansas City's annual symposium later this week, where Fed Chairman Kevin Warsh is expected to address plans to tackle inflation.

The 10-year U.S. Treasury yield last traded 4.8 basis points lower at 4.655%, while the 30-year yield declined 4.5 basis points to 5.185%, according to Tradeweb. The 10-year German Bund yield fell to a one-week low of 3.210%, while the 10-year U.K. gilt yield fell to a 12-day low of 4.992%.

The price of Brent crude oil fell 3% to $89.46 a barrel.

Bessent on Monday announced new sanctions aimed at Iran, warning that countries and companies that do business with the country will face retaliation.

"The geopolitical escalation adds a new layer of complexity heading into Jackson Hole," said Jesper Fjarstedt, senior analyst at Danske Bank.

He expects that Warsh will avoid giving any definitive policy signals or addressing the Treasury's market intervention directly.

The absence of clear forward guidance leaves the Fed's reaction function--what data it will react to and how--unusually uncertain, said Gabriele Foa, global credit portfolio manager at Algebris, in a note. This uncertainty is contributing to a steeper U.S. Treasury curve, caused by long-dated yields staying elevated.

"That runs somewhat against what Bessent has been trying to achieve through lower long-term yields and may point to less coordination between the Fed and the Treasury than some market participants had expected," he said.

Any buybacks of long-dated debt will increase the U.S. Treasury's risk profile, Christoph Rieger, head of rates and credit research at Commerzbank, said.

"The Treasury will soon be facing an interest bill of above $100 billion each month," he said in a note. Longer term, the measures need to be accompanied by a coherent credible fiscal consolidation plan to keep yields down.

ING's Padhraic Garvey, regional head of research for the Americas, said that an expansion in the size of long-end buybacks could help long-dated bonds, but the use of the general account to finance them won't necessarily have a material impact.

"The key messaging here is not on how the buybacks are financed, but on the threat that the buybacks could be increased again," he said.

Write to Emese Bartha at emese.bartha@wsj.com

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August 25, 2026 10:54 ET (14:54 GMT)