Please see below the daily update article from Brooks Macdonald, suggesting that markets recovered after the US Treasury unexpectedly announced an increase in its buyback operations, while investors remain cautious about the longer-term inflation outlook, received this morning – 20/08/2026
What has happened?
Markets recovered yesterday, led by a sharp rally in long-dated US government bonds after the US Treasury unexpectedly announced an increase in its buyback operations. The move pushed the 30-year Treasury yield down 9.2bps to 5.19%, marking its largest daily decline since June. Equities also benefited, with the S&P 500 rising +0.21%. Healthcare stocks outperformed after Moderna (+176.97%) and Merck (+12.60%) reported positive skin cancer vaccine trial results, although weakness in semiconductor shares continued to weigh on broader gains, with the Philadelphia Semiconductor Index falling -2.12%. Elsewhere, gold rose +4.18%, its strongest gain since March, while Brent crude climbed for a fourth consecutive session to $91.62/bbl.
A signal of support for long-term bonds
The Treasury announcement dominated market attention. Officials said they would at least double the size of buyback operations for longer-dated Treasuries, covering maturities from 10 to 30 years, beginning on 9 September. Although the increase is small relative to the overall Treasury market, it surprised investors given that the Treasury had published its provisional buyback schedule only two weeks earlier. More importantly, it signalled a willingness to support the long end of the market after 30-year Treasury yields reached their highest level since 2007 earlier this week. The result was a strong rally in longer-dated bonds and a notable flattening of the yield curve.
Fed minutes offer little urgency
Investors also reviewed the Fed’s July meeting minutes, which showed that “many participants” believed further tightening could be needed if inflation remained elevated. However, the language stopped short of signalling an imminent rate hike. As a result, expectations for further tightening eased slightly, with 2-year Treasury yields ending the session 0.8bps lower at 4.16%. The move was modest compared with the larger rally in longer-dated bonds.
What does Brooks Macdonald think?
The Treasury’s intervention provided immediate relief for long-dated bond markets, but it does not fundamentally change the underlying backdrop of resilient inflation pressures, elevated energy prices and large government borrowing requirements. The reaction across asset classes was particularly telling. While bond yields fell sharply, gold prices rallied strongly, suggesting investors remain cautious about the longer-term inflation outlook. At the same time, the modest decline in expectations for further Fed tightening indicates markets are becoming more confident, even if central banks remain reluctant to declare victory over inflation.
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Alexander James Roberts
20/08/2026