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ING’s Padhraic Garvey analyses how the US Treasury’s decision to double buybacks in 10-30 year maturities affects long-end US Treasuries. He stresses that while the programme is sizeable and could be expanded again, it mainly mutes, rather than reverses, upward pressure on long yields. Garvey still sees scope for higher 10-year yields, but expects resistance to levels above 5%.

Treasury buybacks reshape long-end dynamics

"The Treasury’s decision to increase buybacks in longer durations smacks of discomfort with the sell-off seen in longer tenor Treasury securities of late. It’s been impactful, with the 10-30-year yields down 5-10bp to begin with. The official genesis of the buyback programme, back in May 2024, was to bolster liquidity, and indeed, that was the rationale employed to explain away the announced doubling of buyback sizes in the 10yr to 30yr maturities."

"It's clear that the US Treasury is ready to place a limit to the upside for longer-dated yields. The impact of the increased buybacks is not so much on the doubling of them in long dates, but more so on the implied reality that they could be doubled again, and again if needed. But given what we have now, and until then, upward pressure on long yields will remain."

"Given that, we’d continue to identify upward pressure on long-end yields as a dominant factor that the market will need to deal with. But muted it absolutely is."

"We’re still of the opinion that the 10yr yield has a risk factor move in it to the 4.75% to 5% zone. And for now, it’s unlikely to get much below 4.5%, but one thing has become more clear from this is any move above 5% (or even the material threat thereof), would likely be actively resisted/prevented by the US Treasury Department."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• GBP/JPY rebounds on Thursday as the Japanese Yen underperforms its major peers.
• The wide interest-rate gap between the UK and Japan keeps the British Pound in favour.
• Technically, GBP/JPY holds above key daily moving averages, with initial resistance seen at 216.50.

GBP/JPY edges higher on Thursday, reversing all the losses recorded on the previous day. The move is largely driven by broad Japanese Yen (JPY) weakness rather than any major positive development for the British Pound (GBP), with a sparse economic calendar offering little fresh impetus. At the time of writing, the cross trades around 216.33, up 0.53% on the day.

Despite expectations that the Bank of Japan (BoJ) could raise interest rates next month, the Yen stays under pressure. Higher Oil prices linked to the US-Iran standoff are a key near-term headwind, as Japan relies heavily on imported energy from the Middle East. Broader concerns over government spending and high public debt also weigh on the currency.

Meanwhile, UK inflation and labour-market figures released this week suggest that the Bank of England (BoE) will maintain its current policy stance and keep interest rates unchanged at 3.75%, well above the Bank of Japan’s 1% policy rate. From a trader’s perspective, the wide rate gap favours the higher-yielding British Pound and supports further upside in GBP/JPY.

Looking ahead, traders await Japan’s National Consumer Price Index (CPI), UK Retail Sales and the preliminary S&P Global Purchasing Managers’ Index (PMI) reports for August, all due on Friday.

Technical analysis

From a technical perspective, GBP/JPY has recovered around half of the losses triggered by the joint US-Japan foreign exchange intervention. The cross bounced from the 200-day Simple Moving Average (SMA) and subsequently climbed above the 100-day and 50-day SMAs, reinforcing the constructive near-term bias.

The 14-day Relative Strength Index (RSI) stands near 55, leaning to the upside without approaching overbought territory. The Moving Average Convergence Divergence (MACD) has also turned positive, suggesting that bullish momentum is rebuilding, while the Average Directional Index (ADX) near 23 points to moderate trend strength.

On the topside, initial resistance is seen at the horizontal barrier around 216.50, followed by a stronger cap at 218.50. On the downside, the 50-day SMA at 215.59 offers initial support, ahead of the 100-day SMA at 214.81. A deeper pullback could expose the 200-day SMA at 212.51.

Brown Brothers Harriman (BBH) notes that US long-term Treasury yields have retraced most of their decline following the Treasury’s expanded buyback announcement, while the US Dollar (USD) remains under pressure. The bank argues that although the buybacks should improve liquidity and flatten the yield curve, their timing risks creating the perception that the Treasury is trying to manage long-term borrowing costs, potentially undermining US fiscal credibility and weighing on the Dollar.

Treasury actions weigh on Dollar

"US long-term Treasury yields have retraced most of yesterday’s drop triggered by the US Treasury’s buyback announcement, while USD has extended its decline."

"The Treasury buyback is essentially a debt-management swap. The Treasury buys and retires older, less liquid bonds (off-the-run) in favor of new, more liquid debt (on-the-run) issued through its regular auction. Total debt stays the same but its composition shifts toward newer, more liquid securities."

"The additional buyback size will probably be financed at the margin through greater bill issuance. More front-end supply combined with long-bond purchases, point to a flatter yield curve. However, the impact should be limited given the small size of the operations relative to the overall Treasury market ($31.4 trillion)."

"The timing of the Treasury’s buyback announcement sends a less comfortable message. The Treasury expanded the long-end buybacks shortly after the 30-year Treasury yield reached its highest level since 2007. This suggests that heavy debt supply (public and private) is beginning to strain long-end liquidity and the Treasury is increasingly uncomfortable with rising borrowing costs."

"Bottom line, the perception the Treasury is managing yields rather than liquidity undermines US fiscal credibility and is a drag on USD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Nomura’s European Economics team, led by Josie Anderson, George Buckley and Andrzej Szczepaniak, reviews the latest Riksbank decision to keep the policy rate at 1.75%. They highlight the Bank’s unchanged economic outlook, growing vigilance over upside inflation risks, and guidance that a rate increase later in 2026 remains possible. Nomura now expects CPIF ex-energy inflation to overshoot and a policy rate hike in March 2027.

Nomura shifts hike to March 2027

"The policy rate projection from June reaches 1.82% in Q4 2026, up from 1.77% in the March forecast, and rises to 2.00% in Q4 2027."

"Its guidance was that “the probability of a rate increase later this year remains”. However, recent inflation surprises (Figure 2) have made it more vigilant to upside inflation risks, despite the low headline rate of CPIF inflation."

"Our expectation is for CPIF ex-energy inflation to increase at a slightly faster pace than in the Riksbank’s latest forecast and average 1.2% y-o-y in Q1 2027 before accelerating to 2.4% in Q2 2027, as the base effects from the April 2026 halving of food VAT push up y-o-y inflation."

"Although Riksbank policymakers will continue to look through the effects of temporary tax and fiscal measures, we think the prospect of above-target inflation may add to reasoning to raise the policy rate, particularly if economic growth continues to be robust."

"We maintain our expectation of no change in the policy rate this year. As headline inflation remains so low, we do not think policymakers will be in a rush to remove policy accommodation."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/JPY picks up above 158.50, from nearly two-week lows at 158.03.
• A widening Japanese Merchandise Trade deficit has increased concern about Japan's economic outlook.
• US Dollar bulls remain subdued in the aftermath of US Treasury's bond buyback plans.

The Japanese Yen (JPY) shows a moderate pullback on Friday, despite the broad-based US Dollar (USD) weakness, following the US Treasury’s plan to double buybacks of long-term Government debt. The USD/JPY pair trades at 158.60 ahead of the US session opening after bouncing up from session lows at 158.03 as the widening Japanese Merchandise Trade Balance has hit the JPY.

Data released by Japan’s Ministry of Finance on Thursday revealed that the country’s trade deficit increased to JPY634.5 billion last month, from the JPY409 billion shortfall recorded in June. A 27.8% increase in imports is the main reason for the growing trade gap, as higher energy and semiconductor prices boosted costs in July.

These figures follow weaker-than-expected Japanese Gross Domestic Product (GDP) data released earlier in the week, which cast doubt about the Bank of Japan’s (BoJ) ability to accelerate its monetary tightening cycle, and added bearish pressure on the JPY.

US Treasury's buybacks are keeping Dollar rallies limited

The Yen, however, appreciated 0.9% on Wednesday as the US Dollar plummeted across the board after the US Treasury unveiled a plan to double up liquidity support for longer-dated securities to $4 billion per auction from the current maximum of $2  billion.

The plan is aimed at easing pressure on US long-term Government Bonds, as the yield on the 30-year note hit a 19-year high of 5.33% earlier this week. Figures released by the US Treasury Department showed that national debt rose above $40 trillion, putting investors on edge and prompting bondholders to seek higher compensation.

Looking ahead, FX strategists at UOB highlight that “yesterday, in a sudden move, USD plunged and reached a low of 158.03,” and that “the upside bias has faded.” UOB experts observe that “the downward momentum is starting to build, but it is insufficient for a sustained decline,” pointing to a scenario in which "any (USD/JPY) decline should be contained within a 156.60/159.60 range.”

Geoff Yu at BNY Mellon highlights that foreign investors are accelerating Japanese Government Bond selling while Japanese investors increase purchases of overseas bonds and equities. This flow mix weakens support for the Japanese Yen and points to further depreciation. Strong export and trade data underscore robust external demand but do not offset currency vulnerability.

Portfolio shifts pressure Japanese Yen

"Japan's portfolio flow showed foreign investors accelerated JGB selling last week, with net outflows of ¥1.25tn, cutting YTD foreign net purchases to ¥4.99tn, the lowest cumulative level since early February."

"Despite the sharp rise in JGB yields, higher returns are not drawing foreign demand, raising the risk of further bond unwinding. At the same time, Japanese investors increased overseas allocation, buying ¥1.14tn of foreign bonds and ¥1.39tn of foreign equities, the second-largest weekly equity purchase this year."

"Overall, the flow mix points in the same direction for the currency: foreign selling of Japanese bonds and stronger Japanese buying of foreign assets weaken support for JPY and leave it vulnerable to further depreciation."

"Japan’s July 2026 trade showed a sharp improvement in external demand and import momentum. Exports rose 23.2% y/y to a record July high, lifted mainly by automobiles and semiconductor-related electronic parts."

"By region, exports to the U.S. (22.0% y/y), EU (19.1% y/y) and Asia (24.5% y/y) all grew strongly, while trade with China remained in deficit at ¥775.4bn, with both exports and imports expanding."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Silver consolidates part of Wednesday’s gains and trades around $66.70, down 0.44% on Thursday.
• The US Treasury’s plan to double bond buybacks triggered a sharp decline in long-term yields on Wednesday, supporting precious metals.
• US Treasury yields recover slightly on Thursday, while hawkish Federal Reserve Minutes also limit Silver’s upside.

Silver (XAG/USD) declines 0.44% on Thursday and trades around $66.70 at the time of writing, giving back part of Wednesday’s gains. The white metal remains elevated by the sharp decline in US Treasury yields seen in the previous day, although a modest rebound in yields on Thursday is limiting further upside.

The US Treasury announced on Wednesday that it plans to at least double the maximum size of its liquidity-support buyback operations for longer-dated nominal securities starting in September. The decision comes as rising US borrowing costs have recently put significant pressure on the bond market.

The announcement triggered a sharp decline in long-term US Treasury yields on Wednesday, providing a boost to Silver and precious metals more broadly. However, yields recover some ground on Thursday, with the 30-year US Treasury yield rising back toward 5.23% and the 10-year yield hovering around 4.69%. The modest rebound in yields helps explain why Silver struggles to extend Wednesday’s advance.

The broader decline in yields from recent highs also weighs on the US Dollar (USD). The US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, remains close to a seven-week low on Thursday. Lower yields and a softer US Dollar generally support Silver, as they reduce the opportunity cost of holding the non-yielding metal and make USD-denominated commodities more attractive to buyers using other currencies.

However, the Treasury’s intervention does not remove concerns surrounding US public finances. US national debt surpassed $40 trillion on Tuesday, while investors have been demanding higher compensation to hold longer-dated government bonds. According to ING, the Treasury’s increase in buybacks does little to address the underlying factors pushing yields higher, including large fiscal deficits and elevated inflation expectations.

Silver also faces a headwind from the monetary policy outlook. The Minutes of the July Federal Open Market Committee (FOMC) meeting show that many officials believe an interest rate hike could become necessary if progress in bringing inflation down remains insufficient. Persistently high interest rates would generally weigh on non-yielding assets such as Silver.

Investors now turn their attention to upcoming US data, including the Philadelphia Federal Reserve (Fed) Manufacturing Index and Initial Jobless Claims, as well as comments from Fed officials. The releases could provide fresh direction to US Treasury yields and the US Dollar and, in turn, influence Silver’s next move.

XAG/USD technical analysis

In the one-hour chart, XAG/USD trades at $66.78, maintaining a bullish near-term bias as price holds above both the 100-period simple moving average (SMA) at $65.21 and the 200-period SMA at $65.08. The pair is also supported by a nearby horizontal level at $66.50, while the Relative Strength Index (RSI) at 62.04 stays comfortably above neutral, hinting at sustained positive momentum after the latest advance.

On the topside, initial resistance emerges at $67.33, ahead of a higher barrier at $68.00, where bullish attempts could face profit-taking. On the downside, immediate support is seen at $66.50, with deeper demand clustered around the 100-period SMA at $65.21 and the horizontal floor at $65.10, while the 200-period SMA at $65.08 underpins the broader constructive tone as long as it remains intact.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Chang Wei Liang at DBS Group Research highlights that EUR/USD has rallied toward 1.17, with the Euro the main beneficiary of Dollar softness. July Eurozone CPI matched expectations for both headline and core, reinforcing market conviction in a European Central Bank rate hike in September, with around 26 basis points priced and a very high implied probability.

Eurozone inflation supports ecb pricing

"EUR/USD rallied towards 1.17, with EUR being the prime beneficiary of USD weakness."

"Eurozone’s July CPI came in line with expectations yesterday, with both headline and core inflation matched consensus of 2.9% y/y and 2.5% y/y respectively."

"This has entrenched expectations of an ECB rate hike for Sep, with markets pricing in a 26bps hike with over 90% probability."

"On the other hand, the Fed’s next rate move is less clear given recent economic data softness, and upcoming mid-term elections in November."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

MUFG’s Derek Halpenny and Abdul-Ahad Lockhart highlight that the US Treasury’s unscheduled expansion of long-end buybacks triggered the largest daily US Dollar drop since March outside intervention episodes. They argue the move underscores growing concern over US yield levels, could undermine confidence in US assets, and leaves the Dollar more vulnerable on the downside even if yields are contained.

Treasury buybacks weigh on Dollar

"The US Treasury unscheduled announcement yesterday that it would increase US Treasury bond buybacks resulted in the biggest daily drop for the US dollar since March when you exclude the two episodes of USD selling intervention in April/May and July. The buyback announcement could more than double the total from the original plan of a “maximum” of USD 2bn to “at least” USD 4bn and will be focused on 10-year and longer."

"Well, if Scott Bessent really believes that then the US Treasury could play a key role here by of course addressing the ever-expending fiscal deficit with fiscal consolidation. We all know that’s not going to happen and hence the danger now following this announcement (and the FIMA report comment to Japan following intervention) is that it proves counter-productive and leads to reduced appetite for either holding US assets (UST bond sales) or reduced appetite for exposure to the US dollar (dollar selling) or both. Even if the Treasury buy-back plan does contain yields, the US dollar now remains more vulnerable to the downside on the fact that yields are potentially lower."

"What this buyback announcement does mean is that the Jackson Hole speech next week by Fed Chair Warsh has now become more important. There is no hiding the fact that the latest move higher in yields was triggered by the FOMC and Warsh’s press conference."

"Finally, we should also not ignore the prospect of inflation continuing to subside – that would be an important fundamental backdrop for helping contain yields. That could ease credibility risks related this announcement but of course then the markets would likely remove the tightening currently priced which would also weigh on US dollar performance. There appears to now be more avenues opening for US dollar weakness ahead rather than dollar strength."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• The Indian Rupee gives back a majority of its early gains against the US Dollar.
• Higher Oil prices have offset the support from a weak US Dollar to the Indian Rupee.
• US Treasury Department aims to double bond-buying operations to curb higher borrowing costs.

The Indian Rupee (INR) surrenders a majority of its opening gains against the US Dollar (USD) on Thursday. The USD/INR pair rebounds to near 95.72 from its day's low of 95.59 as higher Oil prices limit the upside in the Indian currency.

In the evening trade, the MCX Crude Oil contract expiring on September 21 trades 2% higher, slightly above Rs. 8,300, the highest level seen in over three weeks.

Oil price extends its rally for a fifth consecutive day after US President Donald Trump announced new measures to intensify economic pressure on Iran, according to strategists at ING. On Wednesday, Trump warned of tougher economic penalties for entities supporting Iranian economic activities, signalling a further escalation in US efforts to isolate Iran and reinforcing the latest leg higher in crude benchmarks.

The Indian currency had a positive opening after thee-day losing streak against the US Dollar, as a sharp decline in long-dated United States (US) bond yields, following the announcement from the Treasury Department that it plans to double its bond-buying operations, weakened the US Dollar.

During the day, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posted a fresh three-month low of 98.56.

INR's upside gets limited due to elevated oil prices

Strategists at OCBC highlight that the Indian Rupee will likely struggle to capitalise on the recent Dollar pullback, with elevated oil prices and importer dollar demand continuing to weigh.” They add that “RBI-linked USD sales appear to have helped contain losses and keep USD/INR from extending higher,” even as the global backdrop has turned more supportive.

In their view, “the overnight USD sell-off and lower US Treasury yields should offer some relief, but the divergence is telling - INR has so far struggled to benefit fully from the weaker USD backdrop while elevated oil prices remains the key headwind given India’s import dependence.” OCBC concludes that “as such, INR may continue to lag the broader Asian complex unless crude prices ease more meaningfully.”

US Treasury plans to double bond-buyback plan

On Wednesday, the US Treasury Department announced that it would at least double the maximum size of its liquidity-support buyback operations for longer-dated nominal securities, The Wall Street Journal (WSJ) reported.

According to the report, the current maximum size of $2 billion per operation will be increased to at least $4 billion per operation. The plan to double bond-buying operations aims to curb a sharp increase in borrowing costs.

Many Fed officials support interest rate rise

The Federal Open Market Committee (FOMC) minutes from the July meeting released on Wednesday that many board members felt the need for interest rate hikes if inflation remains high. The minutes also showed that “a few opted out of an immediate hike, saying it could avoid the need for further increases later”.

Despite several Fed members supporting the need for a near-term interest rate hike, the odds of the US central bank holding interest rates steady in the September meeting remain unchanged.

According to the CME FedWatch tool, there is a 67% chance that the Fed will leave policy rates unchanged in September, marginally higher than the 64% recorded on Tuesday.

Analysts at Jefferies have commented that “economic data released since the meeting meant the minutes now give ​an outdated economic picture”.

The US economic data for July released this month has shown that there is a reduction in the overall labor force by 23K, and June’s Nonfarm Payrolls (NFP) data was also revised lower. Also, the US headline and core Consumer Price Index (CPI) grew at a moderate pace.

USD/INR Technical Analysis

In the daily chart, USD/INR trades at 95.72, holding slightly above the 20-period exponential moving average (EMA) at 95.55, which suggests a mildly constructive near-term bias.

The pair has been oscillating in a tight range, and the Relative Strength Index (RSI) at 54.25 sits just above the neutral line, hinting at modest buying interest rather than strong trend conviction.

On the downside, immediate support is seen at the 20-period EMA around 95.55, followed by the August 12 low at 95.29; below that, the August 5 low at 94.83 will be the major cushion for the pair. On the upside, the pair needs to break above the August 19 high at 95.76 decisively to extend the advance toward 96.00.

(The technical analysis of this story was written with the help of an AI tool. Know more.)