Long-Term Yields Fall on Treasury Move While Short-Term Holds Up — Market Talk

1550 ET - Treasury yields settle mixed as the U.S. government plans to buy back more of its long-term debt. The Treasury department doubles to $4 billion the cap for buybacks of 10- to 30-year maturities. A 20-year bond auction shows signs of firm demand, although the 5.204% yield is the highest since 2023. Fed minutes reveal increasing concern about inflation, but that was before a soft July CPI. Markets mostly price a Fed hold next month. The 30-year yield sheds 0.090 percentage point to 5.194%, the deepest drop since October. The 10-year falls 0.054 p.p. to 4.651%. The two-year rises 0.004 p.p. to 4.178%. ([email protected]; @ptrevisani)1421 ET - On-blockchain lending done through either a CeFi platform like Coinbase or Tether or DeFi providers like Compound, Aave, and Morpho continues to lose steam in 2026, according to a note from Galaxy Research. Combined, crypto-collateralized lending in 2Q 2026 fell by nearly 17% from the prior quarter, totaling $56.2 billion, the firm says. The dollar-denominated value of loans held by DeFi lenders plummeted nearly 28%, to $20.4 billion. While the decreases are large, Galaxy characterizes them as a "steady, stepwise decline," as opposed to a complete collapse of lending volume. "This measured pace points to a much healthier deleveraging cycle, driven by gradual risk reduction rather than forced liquidations or counterparty failures," Galaxy says. ([email protected])1403 ET - The July Fed meeting didn't result in a rate hike, but inflationary risks dominated the conversation about the economic outlook. According to the minutes, "many" officials--the Fed's counting word for a big group who nonetheless didn't make up a majority--continued to think that rate hikes would be needed if inflation didn't cool. Importantly, though, this meeting came before last week's cooler July inflation figures, and before the weaker July jobs report. Those numbers have led traders to pull back bets on a September hike. Plus, there's still another month of inflation and jobs data to come before the Fed's next meeting. ([email protected]; @mattgrossman)1400 ET - The Treasury yields curve flattens as longer-term rates decline on government intervention while shorter maturities hold up. The Treasury Department says it will double to $4 billion from $2 billion the cap for long-term bonds buyback. A 20-year bond auction clears at the highest yield since October 2023, at 5.204% but it was in line with market pricing, indicating stable demand. That compares to a 5.257% rate before the buyback announcement. The 30-year falls to 5.212% from 5.266% before the news and the 10-year slips to 4.670% from 4.706%. Shorter-term Treasurys rise. The two-year reaches 4.201%, up from a morning low of 4.152%. ([email protected]; @ptrevisani)1322 ET - The jump in bitcoin, going as high as nearly $69,000, comes as traders speculate over whether the Federal Reserve's meeting minutes will signal the likelihood of no rate hikes near-term. For bitcoin, the accelerating inflows from institutional investors is giving traders some confidence. "Institutional demand is beginning to recover after several sessions of weakness, which could help improve broader short-term market sentiment," says Julian Pineda of StoneX. Over the previous two days, bitcoin ETFs recorded net inflows totaling nearly $487M. That's a stark reversal from much of the spring and summer, when investors were seen largely pulling money out in favor of more lucrative opportunities like AI stocks. Bitcoin is up 5.9% to $68,374. ([email protected])1222 ET - Remarks from the US Trade Representative about progress on US-Canada trade talks point to the full reversal of digital policies introduced by former Canada PM Justin Trudeau, says internet-law expert Michael Geist. USTR says a tentative deal with Canada will incorporate "digital trade alignment." Geist, a law professor at University of Ottawa, notes Canada had already retreated from a digital-services tax compelling US streamers to hand over up to 15% of their Canadian revenue toward the domestic arts sector. Geist reckons the Trudeau-era online news law is now likely dead too. Meta Platforms blocked links starting in 2023 to news stories on Facebook and Instagram in Canada as the Trudeau administration law wanted digital platforms to finance media outlets. ([email protected]; @paulvieira)1203 ET - Major cryptocurrencies are posting big gains, driven in part by major surges in the amount of trading volumes over the past 24 hours. The Treasury Department steps up its buyback operations for government bonds, which in turn sends yields sharply lower. In turn, riskier assets like cryptocurrency are jumping, with bitcoin up 6.1%, ethereum up 9%, and solana up 6.8%. Trading volumes are up big over the past 24 hours, with ethereum practically doubling its trading volume in that time at $49.3 billion, according to data from Coinglass. Bitcoin volume is up 57% to $76.5 billion. Low trading volumes has been considered a factor for sluggish trade in cryptocurrencies in recent months by analysts. ([email protected])1122 ET - Indirect effects of surging energy prices on eurozone core inflation have been close to zero so far, but they are likely to build in the second half of the year, Capital Economics' Jack Allen-Reynolds says in a note. If energy prices remain around their current levels, headline inflation will soon rise to about 3.5% in the next few months, he says, from 2.9% in July. Together with a likely increase in energy inflation in August, food inflation will probably rise too. Meanwhile, the rise in core goods inflation could have further to run, given that ICT-equipment inflation will keep rising on the back of strong global demand for artificial intelligence-related goods, he says. ([email protected])1103 ET - Short-dated quality bonds could benefit if investors scale back their expectations of central bank interest-rate rises in the coming months, UBS Global Wealth Management strategists say in a note. Current market pricing for central bank rate rises looks too aggressive, the strategists say. Markets price in a total of 24 basis points of Fed rate rises in 2026, and a total of 27 bps of BOE rate increases by year end, LSEG data show. If economic data continue to come in weaker than expected, markets could reduce rate-rise expectations, enabling short-term bond yields to fall, they say. ([email protected])1057 ET - The current low water levels of the River Rhine will hurt German manufacturing production in the third and fourth quarters if sustained, Pantheon Macroeconomics' Claus Vistesen says in a note. The gauge at the bottleneck of Kaub reached record lows in August, with vessels potentially forced to carry substantially less cargo. "A prolonged low water level in the Rhine is a negative supply shock to industrial logistics," Vistesen says. Recent data could point to a 6.6% fall in intermediate-goods production--a decent proxy for sensitivity to low water levels--pushing down industrial production by 2.5% over six months, all else being equal, he says. If the heatwave continues, third and fourth-quarter GDP forecasts could get downgrades of between 0.1 and 0.2 percentage points, he says. ([email protected])1046 ET - Credit spreads on European bonds do not reflect the risk some debt issuers face from exposure to drought conditions, Nuveen's Laura Cooper says in a note. Companies with significant exposure to the effects of drought could be more negatively affected than corporates with diversified revenue streams, she says. Third-quarter corporate earnings are likely to reveal the impact of drought. "Companies with diversified generation, alternative logistics or pricing power should be rewarded as earnings separate the resilient from the exposed." ([email protected])1042 ET - Sukuk or Islamic bonds are emerging as an alternative funding source for some African sovereigns, helped by demand from GCC and African Islamic banks and sharia-compliant investment funds, Fitch Ratings says. African sukuk outstanding reached $7 billion in August, up around 16% on year, though issuance remains infrequent and accounts for less than 1% of global sukuk outstanding. Egypt has become a more regular issuer after regulatory reforms and deeper ties with the GCC, while Benin's $500 million sovereign sukuk this year attracted GCC participation and was more than eight times oversubscribed, Fitch says. Structural constraints mean African issuance is likely to remain sporadic over the medium term. ([email protected])