Citi warns Treasury yield cap could weigh on dollar as interventions expand

  • Citi warned that efforts to hold long-term Treasury borrowing costs below 5.30% could push investors toward non-Treasury assets and weigh on the dollar.
  • The 30-year Treasury yield reached 5.327% last week, while Treasury buyback operations were raised to at least $4 billion from $2 billion.
  • Bond-OIS spreads remained relatively contained, even as Trump cited the military as an "ultimate intervention" and Warsh’s comments lifted September rate-hike pricing to 54%.

Aggressive U.S. efforts to keep long-term Treasury borrowing costs below 5.30% could weaken the dollar by encouraging investors to seek assets outside Treasuries, Citi’s global head of macro and asset allocation strategy Dirk Willer said. Citi abandoned its underweight Treasury position after the Treasury doubled long-duration bond buybacks, while adding gold and maintaining a short dollar position. President Donald Trump separately said the U.S. military could be the "ultimate intervention" to lower interest rates and Treasury yields, drawing criticism from economist Peter Schiff. The 30-year Treasury yield reached 5.327% last week, its highest since 2007, and was about 5.213% at the time of newer reporting, while buyback operations for 10- to 20-year and 20- to 30-year securities were increased to at least $4 billion from $2 billion. Federal Reserve Chair Kevin Warsh’s hawkish inflation comments also lifted market pricing for a September rate hike to 54% from 34%.

The information on this website is generated using AI and we cannot guarantee its accuracy. Please use it as reference information only.