What matters in U.S. and global markets today
By Mike Dolan, Editor-at-Large, Finance and Markets
Buybacks to the rescue? The surprising move by the U.S. Treasury to double the amount of bond buybacks in the two months before the midterm elections steadied the shaky government debt market on Wednesday.
The move was a surprise because the Treasury's quarterly refunding plans, published just two weeks ago, included no mention of a plan to step up the repurchase of older, less traded debt with long maturities.
I'll get into that and more below.
TWIST AND SHOUT
The recent storm in debt markets, which has seen long-dated yields surge to their highest levels in decades, clearly jarred the Treasury enough to prompt the action.
Will the retreat in yields last? Buybacks don't change the amount of debt being raised but may shift the emphasis to raising more short-term funds - something analysts commonly refer to as "operation twist".
But with the total U.S. government debt pile topping $40 trillion for the first time this week, more than double the tally a decade ago, the need to continually roll over bills and short debt could face problems of its own.
The timing of the buyback announcement helped the latest 20-year Treasury auction proceed without much difficulty, although relatively hawkish minutes from the Federal Reserve's latest meeting suggest no relief in the cost of short-term debt servicing is coming any time soon.
One casualty of the Treasury's latest bond plan, however, was the dollar, which fell sharply across the board.
Meanwhile, the Canadian dollar was a big winner on Wednesday as details emerged of a potential trade deal with the U.S. to avert Washington's planned tariff increase. The deadline has been pushed back to Saturday.
Elsewhere, the bond bounce helped stocks steady too. The standout share move on Wednesday was a near-trebling of pharma firm Moderna's stock price after it revealed a breakthrough with Merck in developing vaccines for skin cancer - a potential game changer in all cancer treatments going forward.
Chart of the day
Even though crude oil prices remain well below the highs of the six-month-old Iran war, ROI Energy Columnist Ron Bousso points out that refined products have not enjoyed the same relief. European diesel prices have surged more than 70% since the war began, while U.S. gasoline prices have climbed around 60%.
As Ron explains, this reflects a dramatic decline in refining output. The war knocked out more than 20% of the Middle East's 9.6 million barrels per day of refining capacity, according to the IEA, while fuel exports remain suppressed due to the closure of the Strait of Hormuz.
The loss of Gulf crude, in turn, led many refiners, particularly in Asia, to curtail operations. That strain was then amplified by months of relentless Ukrainian strikes on Russian energy infrastructure.
Today's events to watch
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