The US dollar is little changed in overnight trading as financial markets digest the Treasury Department’s debt buyback operations. The US government unveiled its latest efforts to repurchase government bonds, and investors were widely disappointed.
The US Dollar Index (DXY), a measure of the greenback against a weighted basket of currencies, was flat at 98.76 on Wednesday night. The index has slumped more than 1% over the past month but remains up nearly 0.5% year to date.
In its highly anticipated announcement, the department said it will buy back up to $6 billion of government debt in an operation to stabilize the US government bond market.
It followed the Aug. 19 statement confirming the move to purchase at least $4 billion in long-dated bonds, doubling the initial schedule. But now the move triples the original plan.to
The first operation will begin on Sept. 19 when the Treasury repurchases $6 billion in ten- and 20-year notes.
Despite these actions, yields were up across the board, with the benchmark ten-year reaching as high as 4.85%. The 20- and 30-year yields rose to as high as 5.314% and 5.307%, essentially the same levels as when the Treasury first enhanced its buyback operations.
Investors had expected the Treasury to buy up to $10 billion in bonds.
“At the end of the day, the Treasury is issuing a spectacular amount of securities, and they’re trying to control the price level at the back end of the curve with really what, in the big scheme of things, is not necessarily a major operation,” said Robert Tipp, chief investment strategist and head of global bonds at PGIM Credit, according to CNBC.
“When they came out and said we would be buying at least 4 billion, I think market expectations were kind of thinking six to 10, and they’ve come in at the bottom end of the market’s expectations,” he continued. “As a result, you’re seeing a negative reaction here in the market with the sell-off at the back end of the curve.”
The USD/CAD currency pair was flat at 1.3807, its highest level in three weeks. The EUR/USD was also unchanged at 1.1633.