US Government Struggles to Keep a Lid on 10-Year Treasury Yield and Mortgage Rates

Core Viewpoint - The U.S. government is prepared to intervene in the currency market to support the yen against the dollar, following significant fluctuations in the Japanese bond market and the yen's depreciation [2][5]. Group 1: Currency Market Intervention - A "rate check" was conducted by Treasury Secretary Scott Bessent to stabilize the yen, which had fallen sharply against the dollar [1][2]. - Following the "rate check," the yen appreciated from 159.2 to 155.7 yen per USD within hours [3]. Group 2: Bond Market Dynamics - The Japanese bond market experienced a meltdown, with the 30-year Japanese Government Bond yield rising by 42 basis points to 3.91%, the highest since its introduction in 1999 [5]. - The 10-year U.S. Treasury yield increased to 4.30%, up 17 basis points in a week, impacting mortgage rates which rose to 6.20% from 6.01% [6]. Group 3: Government Actions and Market Reactions - Bessent communicated with Japanese officials to address market concerns, leading to a decrease in the 10-year yield from 4.30% to 4.23% after the "rate check" [7]. - The U.S. government-sponsored enterprises, Fannie Mae and Freddie Mac, initiated buybacks of mortgage-backed securities (MBS) to help lower mortgage rates, with a directive to buy back $200 billion in MBS [9][10].