Bicent's 4B promise fails to reassure bonds
The article discusses the failure of the U.S. Treasury Department's plan to calm the bond market through expanded long-term repurchase operations, which were announced in August and scheduled to begin in September. While the announcement initially caused a temporary dip in yields by as much as 10 basis points and a decline in the dollar's value, these effects did not last. The market quickly rebounded, with yields returning to pre-announcement levels. This resurgence is attributed to rising inflation expectations, as anticipated inflation indicators increased from 2.27% to more than 2.34%. The difficulty is further related to heightened fiscal deficits, with the country's debt surpassing $40 trillion, along with increased bond issuance and diminishing confidence in the effectiveness of policy tools to control yields—especially as government borrowing continues and tech companies finance large-scale projects. Consequently, expectations remain that yields will continue to climb, as investors worry about sustained long-term inflationary pressures.
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