US Treasuries rallied as a sharp decline in oil prices helped ease inflation fears, giving Treasury secretary Scott Bessent some relief after months of rising long-term borrowing costs, according to a report by Bloomberg.
Yields fell by around five to seven basis points across the Treasury curve on Tuesday, helped by a more than 4% drop in Brent crude and stronger-than-expected demand at a two-year note auction.
The move has pushed the 30-year Treasury yield down about 12 basis points to 5.16% since Bessent last week announced plans to at least double the government’s purchases of longer-dated debt.
The Treasury’s surprise buyback programme has provided some near-term support for the bond market by signalling that Washington is prepared to reduce the supply of long-term debt and intervene as yields rise.
However, investors remain sceptical that the purchases can reverse the broader forces driving Treasury yields higher. Inflation remains elevated, while concerns over the US fiscal deficit and a growing supply of government debt continue to weigh on the market.
Stanley Druckenmiller, who previously mentored Bessent, has described the intervention as a mistake, arguing that attempts by governments to defend asset prices against underlying fundamentals are unlikely to succeed.
Tuesday’s Treasury rally was also supported by falling energy prices as expectations of a de-escalation in the Middle East weighed on crude.
Brent fell more than 4% following reports that the US was preparing to return diplomats to embassies in the region. The move was interpreted as evidence that the Trump administration does not expect a return to full-scale conflict with Iran as it shifts towards economic pressure and sanctions.
Oil nevertheless remains above its pre-war levels, keeping inflation risks elevated. Higher energy costs have added to pressure on a Treasury market already dealing with heavy government issuance and additional borrowing by technology companies seeking to fund artificial intelligence infrastructure.
Bessent has made lower 10-year Treasury yields one of the measures by which he intends to judge the success of his policies. His efforts to contain the rise in borrowing costs have included several unconventional measures, although investors remain doubtful about the Treasury’s ability to exert sustained control over yields.
