U.S. Treasury's Buyback Volume Increase Seen as Attempt to Calm Nerves — Market Talk

0515 GMT - The U.S. Treasury's announcement Wednesday of an increase in its buyback program appears to point to an attempt to calm nerves as the 30-year Treasury yields moved steadily towards 20-year highs, TwentyFour Asset Management's Eoin Walsh says in a note. "The timing of the move suggests the Trump administration is feeling the rate pressure, possibly with midterm elections on the horizon," the partner in portfolio management says. It may also be because there is no other help at hand: President Trump is doubling down on "crushing economic operations" on Iran, while the Federal Open Markets Committee minutes showed that many participants believed that hikes would be needed if the rate of inflation fails to decline, Walsh says.([email protected])0512 GMT - The Bank of Japan is likely to raise its policy rate to 1.25% from the current 1% at its next meeting in September, SMBC Nikko Securities economists say. The bank is then expected to make additional hikes in January and June 2027 to reach a terminal rate of 1.75%, they note. "It is unlikely that the central bank will raise its policy rate to 2%--above average estimates of the neutral rate--after next summer, when import-driven inflationary pressures are expected to wane," they add. The overnight index swap market is currently pricing in an 84% chance of a BOJ rate hike in September and two rate increases by early 2027. ([email protected])0435 GMT - Japan's food prices remain at high levels, reflecting the pass-through of higher packaging costs stemming from the surge in naphtha prices amid the Strait of Hormuz blockade, says SMBC Nikko Securities economist Koya Miyamae. Food prices, excluding fresh items, increased 3.0% in July from a year earlier after June's 3.1% rise, government data showed Friday. Moves to pass on rising packaging costs will likely continue as supply and demand for petrochemicals remain tight, he says. On the other hand, falling rice prices will likely cap any significant acceleration in food prices, he adds. ([email protected])0420 GMT - Japan's core consumer inflation, which excludes fresh food, is likely to remain in the upper 1% range in August and September, says SMBC Nikko Securities economist Koya Miyamae. The economist attributes this to the resumption of government subsidies for electricity and city gas, which is expected to cap any acceleration in price gains. From autumn into winter, core CPI growth will likely speed up into the 2% to 3% range as utility bills rise on fading effects of subsidies and the spillover from higher crude oil and LNG prices amid the Strait of Hormuz blockade, he adds. The core measure rose 1.8% in July from a year earlier, compared with June's 1.6% increase, Friday's data showed. ([email protected])0328 GMT - Bitcoin rises sharply in Asian trading, up 2.5% at $74,457.00. There are renewed fears over fiscal dominance, says Matthew Sigel, head of digital assets research at VanEck. Gains are being driven by concerns over how the U.S. government is financing its $40 trillion debt, rather than debate over the pro-crypto Clarity Act, he says. Sigel notes the Treasury is increasingly relying on short-term Treasurys to borrow money, raising concerns over higher debt-servicing costs. This may ultimately create pressure on the dollar, forcing policymakers toward easier monetary conditions. With bitcoin rising as the dollar weakens, investors are increasingly viewing the cryptocurrency as a hedge against a weaker dollar. Bitcoin is . ([email protected])0323 GMT - Japan's inflation data support a Bank of Japan rate hike in September, RBC Capital Markets' Abbas Keshvani says in an email. Also, "the BOJ sounded more hawkish on inflation in July," the director of Asia macro strategy says. Markets are "now pricing in more hikes and faster, with 20bp priced for September," Keshvani says. "The central bank knows that disappointing the market risks sending the yen weaker," the director adds. The dollar is 0.1% lower at 158.95 yen, LSEG data show. ([email protected])0238 GMT - Sales of new homes in Australia declined for a third consecutive month in July, falling by 3.7% from June as higher interest rates and policy uncertainty continued to weigh on consumer confidence, according to data from the Housing Industry Association. The data suggests buyer caution rather than a decline in underlying demand for homes, it adds. Sales of new homes in the three months to July were 13.5% lower than in the previous quarter, the data showed. The data comes as house prices have tumbled in major capital cities. ([email protected]; X @JamesGlynnWSJ)0231 GMT - The Singapore dollar strengthens slightly against its U.S. counterpart in the Asian session, as traders question the efficacy of Treasury Secretary Bessent's plans. On CNBC, Bessent emphasized that buybacks could exceed $4 billion per operation, saying the government has "a big toolkit" to bring down yields. Bessent also pushed back on deficit worries, saying much of the gap reflected temporary tariff refunds and business investment incentives. However, "markets do not seem to be buying into the ability of the U.S. to credibly consolidate its fiscal deficit so far," says Michael Wan, senior currency analyst at MUFG Bank, in a research report. The U.S. dollar is 0.1% lower at 1.2706 Singapore dollars, FactSet data show. ([email protected])0231 GMT - There's a 30% chance that Australia's economy contracted in 2Q, says Westpac economist Pat Bustamante. The bank is forecasting the economy grew by just 0.2% in the quarter. The estimated probability of a negative quarter in 3Q has edged down to 9% from 11%, suggesting conditions are beginning to stabilize, Bustamante adds. Recent data suggests the economy remains stuck in the slow lane and growing at the pace experienced in late 2024 and early 2025, he says. The Reserve Bank of Australia is likely to be comfortable with this combination of subdued growth and economic resilience, focusing on reducing inflation without worrying about a hard landing. ([email protected]; X @JamesGlynnWSJ)0225 GMT - Japan's consumer inflation data for July highlights some effects of higher energy costs triggered by the Middle East conflict, says Mizuho Securities economist Ryosuke Katagi. Electricity and city gas bills are creeping higher, while prices for many food items and household goods have accelerated, he says. "The results suggest that the impact of tensions in Iran is starting to gradually spill over into [Japan's] consumer prices," Katagi says. He expects inflation to pick up through the second quarter of 2027. Consumer prices, excluding fresh food, rose 1.8% in July from a year earlier, compared with June's 1.6% increase, Friday's data showed. ([email protected])0109 GMT - Japan's inflation pick-up clears the way for a BOJ rate hike next month, Capital Economics' Abhijit Surya says in commentary. Government data released earlier showed Japan's consumer prices, excluding fresh food, climbed 1.8% in July from a year earlier, compared with June's 1.6% increase, the senior APAC economist notes. "With underlying price pressures intensifying, we're growing more confident in our view that the Bank of Japan will hike rates again at its meeting next month," Surya says. Capital Economics expects the BOJ to raise rates by 25 bps at its September meeting, and eventually increase rates to peak of 2% by end-2027. ([email protected])0058 GMT - Most Asian currencies strengthen slightly against the dollar on skepticism over the U.S. Treasury Department's bond buyback plan. The plan "failed to anchor long-term [U.S.] yields for now, raising doubts whether Treasury buybacks can sustainably lower borrowing costs against persistent fiscal and structural pressures," strategists at OCBC Group Research say in a report. "So far, the surprise buyback programme has coincided with a weaker USD, higher gold prices and rising breakeven inflation rates," the strategists add. The U.S. dollar falls 0.5% to 1,387.30 won and edges 0.1% lower to 1.2712 Singapore dollars, LSEG data show. ([email protected])