Bitunix Analyst: US Treasury Yields Approach 5%, Buybacks Struggle Against Inflation and Capital Demand

BlockBeats news, September 12 — The U.S. Treasury market continues to face selling pressure, with the 10-year yield rising to around 4.94% and the 30-year briefly touching 5.35%, indicating that the market's pricing of a higher-for-longer interest rate environment is still deepening. Even after the Treasury raised the cap on long-term U.S. bond buybacks to $6 billion, with only $5.19 billion actually purchased, yields still moved higher, reflecting that policy operations can improve liquidity but are hard-pressed to reverse the structural pressures created by inflation, fiscal deficits, and long-term capital demand.

Rising oil prices further amplify this contradiction. Higher energy costs could reignite inflation expectations and also prompt investors to raise their bets on Federal Reserve rate hikes in advance. The market-implied probability of a rate hike has now risen to 71%, meaning that even before CPI is released, the bond market has already begun pricing in a more restrictive policy path. The real key therefore is not just a single month's inflation data, but whether the market believes that energy, tariffs, and supply chain pressures will cause underlying inflation to lose its downward momentum again.

On the other hand, the capital expenditure boom driven by AI construction is also changing long-bond pricing. A surge in corporate debt issuance to compete for funds means the U.S. government is not the only source of capital demand; when capital flows simultaneously to the government and to corporations, long-term interest rates naturally become harder to push down through Treasury buybacks alone. Druckenmiller even argued that given the current level of capital expenditure and competition for funds, U.S. Treasury yields are "even a bit low," highlighting that some investors have already come to view this round of rising rates as fundamentals rather than mere market sentiment.

Therefore, the real problem currently facing U.S. Treasuries is not how much the Treasury can buy, but how much yield the market demands before it is willing to take on long-term U.S. debt. If CPI runs hot, rate hike expectations and long-end yields may further reinforce each other; if CPI cools, the market will need to reassess whether high yields can fall back. The core of this game has gradually shifted from whether policy can influence the market to whether policy can counter fundamentals.