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Long-term borrowing costs in the US rose again despite an announcement from the government that it would intervene to try to lower them. <\/b><\/p>\n
Earlier this week, the Treasury Department said it would buy back more debt in a bid to lower rates being charged by investors on global bond markets, which governments and major corporations rely on to borrow money.<\/p>\n
While rates – or yields as they are called – eased on borrowing over 30 years following the intervention, they have since risen again. Such moves can affect mortgage rates and car loans.<\/p>\n
Economists said the surprise move by the US government had proved short-lived, with ongoing concerns over the level of borrowing as national debt passed $40tn.<\/p>\n
On Friday, the interest rate on 30-year bonds had risen to around 5.27%.<\/p>\n
Governments and corporations sell bonds – essentially an IOU – to raise money for spending, and in return they pay interest. Interest rates on bonds are known as yields.<\/p>\n
Bond investors typically demand higher returns – or yields – if inflation is high or they expect it to be elevated in the future.<\/p>\n
Yields had fallen sharply earlier this week to 5.18% from an almost two-decade high of 5.34% following the Treasury Department announcing its “support”.<\/p>\n
By stepping in to buy back government debt, Treasury Secretary Scott Bessent aimed to boost demand for bonds and lower borrowing rates.<\/p>\n
But the strategy has appeared to have only worked in the short-term.<\/p>\n
John Canavan, lead analyst at Oxford Economics said the response to the government’s intervention was “unsurprisingly short-lived”.<\/p>\n
He said traders were focused on the “daunting” amounts of global borrowing from governments and corporations, as well as increases in oil prices.<\/p>\n
“As Bessent himself confirmed, the move is mainly a signalling mechanism, with the Treasury showing it is prepared to step in with yields near current levels,” said economists at Capital Economics. <\/p>\n
“It is not necessarily an effective one, however, as much of the initial fall in 30-year yields has now been reversed.”<\/p>\n
The BBC has contacted the Treasury Department for comment on the market reaction.<\/p>\n
Bessent sought to blame the Biden administration for the current situation, telling US media on Thursday: “We did not get here in a day, we were left with a mess.”<\/p>\n<\/div>\n