Expanded Treasury Buybacks as Strong Economic Activity Fuels Inflation Concerns

Daily News

Summary:

The US Treasury plans to buy back up to $6 billion of long-term Treasuries; US business activity rises to its highest level in more than five years, intensifying inflation pressures...

【Highlights】

1. US Treasury to buy back up to $6 billion of long-term Treasuries as yields continue to rise

2. Rubio: Iran talks were positive but made no breakthrough

3. US business activity rises to its highest level in more than five years, intensifying inflation pressures

4. Makhlouf: ECB would need to raise rates again if second-round inflation effects emerge

5. US considers imposing a 90-day ban on diesel exports

6. Iranian president: Iran is willing to negotiate and cooperate but will not accept coercion or threats

【Details】

US Treasury to Buy Back Up to $6 Billion of Long-Term Treasuries as Yields Continue to Rise

The US Treasury will buy back up to $6 billion of long-term government bonds on Thursday, marking the first operation under Treasury Secretary Scott Bessent’s expanded buyback program. The move is aimed at containing the recent rise in borrowing costs, but so far has not been enough to push Treasury yields lower.

In early August, the Treasury had initially indicated to investors that its buyback program would be capped at $2 billion. The newly announced maximum amount is three times that level. On August 19, the Treasury announced that the size of its buyback operations would at least double to $4 billion.

The Institute of International Finance (IIF) had earlier warned that financial interventions alone cannot address the underlying structural problem of rising debt. Measures such as buying back bonds in the secondary market may provide temporary relief, but they cannot resolve the structural factors driving the increase in debt.

Rubio: Iran Talks Were Positive but Made No Breakthrough

US Secretary of State Marco Rubio said Iran opened fire on a merchant vessel on Wednesday morning and that reaching an agreement with Iran would require considerable effort and time.

Iranian Foreign Minister Abbas Araghchi met with US Middle East envoy Steve Witkoff in New York on Tuesday on the sidelines of the 81st session of the United Nations General Assembly.

Rubio said there would be costs associated with taking action on Iran, but the United States would not put the international order ahead of its own interests. He described the Iran talks as a continuation of previous discussions and emphasized that while the meeting was positive, it did not produce a breakthrough.

Rubio also said President Donald Trump had many options for responding to Houthi attacks against Saudi Arabia.

Regarding the Russia-Ukraine conflict, Rubio said both Russia and Ukraine want a limited ceasefire covering food and energy infrastructure.

US Business Activity Rises to Highest Level in More Than Five Years, Intensifying Inflation Pressures

US business activity accelerated in September to its highest level in more than five years, driven by a surge in new orders. However, strong demand also put pressure on supply chains and pushed prices higher.

S&P Global said on Wednesday that the preliminary US Composite PMI rose to 58.4 in September, its highest level since July 2021, up from 56.0 in August. The increase reflected strong growth in both the services and manufacturing sectors. S&P Global said the PMI reading was consistent with the US economy expanding at an annualized rate of around 5%.

The agency also noted sharp increases in backlogs of work and supply-chain delays, indicating capacity constraints and contributing to further price increases.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said business activity in both the manufacturing and services sectors was clearly very strong. However, excluding the pandemic period, the current growth has been accompanied by one of the most severe supply-chain bottlenecks in the survey’s nearly 20-year history.

The supply constraints are mainly attributed to the war involving the United States, Israel and Iran, which has now entered its seventh month.

Makhlouf: ECB Would Need to Raise Rates Again if Second-Round Inflation Effects Emerge

Gabriel Makhlouf, an ECB Governing Council member and Governor of the Central Bank of Ireland, said in an interview with foreign media that the European Central Bank would raise interest rates again if higher energy prices begin to feed through into other areas of the economy.

Makhlouf said that although inflation remains above the central bank’s target, there is currently no evidence of second-round effects causing broader price pressures. However, “if that happens, we would have to act again to achieve our target.”

Earlier this month, the ECB raised interest rates by 25 basis points, in line with market expectations.

ECB President Christine Lagarde said after the decision that despite the energy shock, the euro-area economy had remained resilient in the second quarter, a trend that could continue into the third quarter. Growth was broad-based across countries and sectors, the labor market remained resilient, and the near-term growth outlook had improved.

Makhlouf had previously warned that a prolonged conflict in the Middle East could keep inflation elevated for an extended period. However, he also cautioned that further significant rate hikes by the ECB could weigh on economic growth.

US Considers Imposing a 90-Day Ban on Diesel Exports

The White House is preparing a 90-day ban on diesel exports, Politico reported, citing unnamed sources.

According to Politico, it remains unclear what legal authority would be used to implement the ban. However, US President Donald Trump is reportedly inclined to introduce the measure before the end of this week.

If implemented, the ban would represent the most aggressive measure taken by the Trump administration so far to ease surging fuel costs. It would also highlight the pressure facing Republicans as the November midterm elections approach.

Iranian President: Iran Is Willing to Negotiate and Cooperate but Will Not Accept Coercion or Threats

On September 23 local time, Iranian President Masoud Pezeshkian delivered a speech during the general debate of the 81st session of the United Nations General Assembly.

He said Iran was willing to negotiate and cooperate but would not accept being forced to make concessions through coercion, sanctions or military threats. Peace, he said, must be based on fairness, justice, dignity and the equal rights of all countries.

Pezeshkian emphasized Iran’s commitment to protecting its national security and sovereignty and maintaining its right to the peaceful use of nuclear technology. He said Iran’s defensive capabilities were an important safeguard against external threats, while rejecting the pursuit of security through hegemony.

Pezeshkian criticized what he described as double standards by some countries on Iran’s nuclear issue, as well as on Israel and the Palestinian issue, arguing that continued occupation, aggression and injustice would exacerbate regional conflicts.

He said war and military force could not replace international law, diplomacy and political dialogue, and called for regional cooperation to achieve common security.

【Today’s Key Events】

15:15 (UTC+8) ECB Executive Board Member Isabel Schnabel Speaks

15:30 (UTC+8) Swiss National Bank September Interest Rate Decision

16:00 (UTC+8) Swiss National Bank Chairman Martin Schlegel Holds Press Conference

16:00 (UTC+8) Germany September IFO Business Climate Index

16:10 (UTC+8) New York Fed President John Williams Speaks

17:00 (UTC+8) ECB Chief Economist Philip Lane Speaks

20:00 (UTC+8) Richmond Fed President Thomas Barkin Speaks

20:50 (UTC+8) Cleveland Fed President Beth Hammack Speaks

22:00 (UTC+8) US August New Home Sales Annualized

22:10 (UTC+8) Philadelphia Fed President Paulson Speaks

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data