Daily Asia

20 August 2026, 22:11 UTC Chief Investment Office GWM Investment Research

The Treasury’s rare intervention buys time, not a solution UBS House View - Daily Asia Min Lan Tan, Head Chief Investment Office APAC, UBS AG Singapore Branch Mark Haefele, Global Wealth Management Chief Investment Officer, UBS Switzerland AG Jon Gordon, Strategist, UBS AG Hong Kong Branch Frederick Mellors, Strategist, UBS Switzerland AG Leslie Falconio, Head of Taxable Fixed Income Strategy, CIO Americas, UBS Financial Services Inc. (UBS FS) Andrew Dubinsky, US Economist, UBS Financial Services Inc. (UBS FS) Kurt Reiman, Head of Fixed Income, Americas, UBS Financial Services Inc. (UBS FS)

From the studio What to watch: 21 August: Podcast: Signal over Noise with Ulrike Hoffmann-Burchardi, on Apple • UK retail sales for July or Spotify (6 mins) • Eurozone business activity readings for August Video: Market Playbook | James Cheo on fixed income (5 mins) Video: The AI Show | China tech earnings update and what's next (3 • US business activity readings for August mins) • Eurozone consumer confidence reading for August Thought of the day The US Treasury surprised markets this week by doubling the size of its • Spain overnight stays for July buyback operations for longer-dated Treasuries, targeting the 10-30-year segment of the market. The move came after the 30-year Treasury yield climbed to 5.34%, its highest level since 2007, amid growing concerns over persistent fiscal deficits, rising government borrowing needs, and weaker demand for long-duration government debt.

While the increase in buybacks is modest relative to the USD 32 trillion Treasury market, it still prompted a notable reaction: 30-year Treasury yields fell nearly 10 basis points, the US dollar weakened against every major G10 currency (DXY -0.8%), gold prices rallied more than 4%, and equities moved higher. Adding to the surprise, the announcement came just two weeks after Treasury officials outlined a buyback schedule that gave no indication of the move, and was timed ahead of a closely watched 20-year auction and during the typically quiet late-summer trading period.

The Treasury's actions may have helped cap the surge in yields this week, but we think investors should avoid overinterpreting the longer-term implications:

The Fed path still depends on inflation, not intervention. While the Treasury announcement overshadowed the July Fed minutes, the minutes reinforced that inflation remains policymakers' primary concern. Several officials favored a rate increase, while many believed further tightening could be necessary if inflation does not continue to improve. At the same time, most participants expected inflation pressures to moderate over the remainder of the year. Importantly, the minutes predated the softer

This report has been prepared by UBS AG Singapore Branch, UBS Switzerland AG, UBS AG Hong Kong Branch, UBS Financial Services Inc. (UBS FS). Please see important disclaimers and disclosures at the end of the document.

inflation and labor-market data released this month. In our view, the latest data remain consistent with the Fed staying on hold this year, albeit with a data-dependent stance.

History shows bond-market interventions have limits. Japan and the UK offer useful lessons. Both countries have used bond purchases, buybacks, or issuance adjustments to influence long-end yields. While such measures can reduce volatility and provide temporary relief, they have not permanently lowered borrowing costs when fiscal, inflation, or supply dynamics remained unfavorable. We believe the same principle applies in the US. The Treasury's buybacks may discourage aggressive curve- steepening trades and reduce near-term market stress, but they do not address the forces supporting higher term premia, including persistent deficits, elevated capital demand, and a shift in Treasury ownership toward more price-sensitive private investors. In addition, the temporary nature of the program (which runs from 9 September through 4 November) reinforces the view that this is a tactical measure rather than a permanent solution.

While unusual, this is not quantitative easing. Unlike QE via the Fed, the Treasury…