U.S. financial markets took a hit from several directions on Thursday. Oil surged to a near four-month high, the Treasury’s bond buyback operation disappointed traders, and President Donald Trump’s pledge to send cash to American adults added another layer of pressure to an already fragile backdrop. Treasury yields jumped across the curve, while stocks fell in tandem.
Brent crude settled up 6.3% at $107.63 a barrel and moved higher to $109 after the close. Data released the same day showed the U.S. producer price index rose 5.4% year over year, above expectations. The bond buyback operation led by Treasury Secretary Scott Bessent also failed to reach its $6 billion ceiling, with actual purchases coming in at about $5.2 billion, fueling doubts about the government’s ability to contain long-end rates.
At the same time, according to CCTV International, Trump said in Dallas on Sept. 9 that if Republicans win majorities in both the House and Senate in the midterm elections, he would send $5,000 to every U.S. adult. Estimates from multiple media outlets cited in the source put the total cost at about $1.2 trillion to $1.3 trillion, far above roughly $190 billion in annual tariff revenue.
Treasury yields climbed sharply across maturities
The market reaction was swift. The 30-year Treasury yield rose 8 basis points to 5.37%, the highest since 2007. The 10-year yield climbed 12 basis points to 4.943%, approaching its late-2023 high and moving close to the 5% level watched closely by investors. The policy-sensitive 2-year yield jumped 16 basis points to 4.59%, marking its biggest one-day increase since the tariff shock in April 2025.
Equities also weakened. The S&P 500 fell 0.6%, the Nasdaq 100 lost 0.9%, and the Dow Jones Industrial Average dropped 317 points.
Oil became the main trigger for the latest selloff
The source described worsening conditions in the Middle East as the core trigger behind the bond selloff. Media reports said Houthi forces seized an important port in Yemen, while Saudi Arabia’s crude output dropped sharply, helping drive oil prices higher.
An OPEC report released Thursday showed Saudi production in August fell to 6.2 million barrels a day, the lowest monthly level since the start of 2026 and down 23% from July. Against that backdrop, Brent settled at $107.63 and later rose to $109, its highest level in nearly four months.
Bob McNally, founder of Rapidan Energy Group and a former energy adviser to President George W. Bush, said: “The oil market is correcting the biggest pricing error since the 2022 Russia-Ukraine conflict. Back then the market was overly pessimistic about the scale and duration of supply disruption, and now it is overly optimistic.”
Higher oil prices also fed into inflation expectations. U.S. Labor Department data released Thursday showed August PPI rose 5.4% from a year earlier, up from 4.7% in the prior month, with higher fuel costs cited as a main driver. Interest-rate futures showed the market pricing of a Federal Reserve rate increase at next week’s meeting rose to 71%, up from 49% a week earlier.
Jim Burkhard, vice president at S&P Global Energy and head of global crude oil research, said: “The market has not returned to calm. It is adapting to a new normal defined by unresolved conflict and persistent shipping risks. In that setting, oil flows will remain below pre-war levels and the outlook remains uncertain.”
The Treasury buyback fell short of the cap and failed to reassure the market
The Treasury’s repurchase program had been seen as one tool to stabilize long-term rates. Instead, the result added to market pressure.
Bessent said last month that the Treasury would at least double the size of long-dated bond buybacks to $4 billion per operation. On Wednesday, he said the first expanded operation would carry a $6 billion cap, triple the prior maximum ceiling. The result released Thursday afternoon showed the Treasury bought only $5.19 billion of 10-year to 20-year bonds, below that limit, even though dealers submitted $10.5 billion in offers.
After the result, long-end yields moved higher again. George Catrambone, head of fixed income at DWS Americas, said: “Bessent brought a water pistol to a fire fight. Given the current debt, deficit and inflation concerns, this is nowhere near enough to calm the risk premium investors require to own 30-year Treasuries.”
Bloomberg reported that some analysts were more cautious in their reading, saying the lower purchase amount may have reflected the Treasury’s decision to reject unattractive offers rather than a lack of market supply. Bessent said in an interview: “We only buy back bonds when they’re cheap. People seem to want to hold on to their long bonds.”
Molly Brooks, a strategist at TD Securities, said: “This suggests the Treasury’s screening criteria were stricter than usual. If the Treasury wants to meet market expectations and complete the full buyback amount to push down long-end yields, it may need to accept less competitive offers in the future.”
Also on Thursday, the Treasury sold $22 billion in 30-year bonds at the highest borrowing cost in 25 years. The high yield for the auction was 5.308%, up from 5.216% last month and the highest since 2001. Even so, demand for the sale remained solid, helped by elevated yields.
Trump’s $5,000 cash pledge added to fiscal worries
Trump’s proposal added another source of strain to an already uneasy fiscal outlook.
According to CCTV International, Trump said on Sept. 9 in Dallas that if Republicans retain control of Congress, he would send a $5,000 “dividend” to every American adult. The plan was described as costing more than $1 trillion, and the source cited media estimates of roughly $1.2 trillion to $1.3 trillion.
The article said that amount is roughly 70% of last year’s $1.8 trillion U.S. budget deficit, without including any additional stimulus measures. Without another source of revenue, the spending would ultimately become new government debt. As of Tuesday this week, total U.S. national debt stood at $39.9 trillion, of which $32.4 trillion was held by the public.
Inflation risks were also in focus. The U.S. inflation rate currently stands at an annual 3.4%. The source said a large cash transfer could stimulate consumer spending and add pressure on the demand side. If such a plan were implemented, a renewed rise in inflation pressure could also keep monetary policy tighter.
The Wall Street Journal reported that part of the continued rise in bond yields reflects concern over expanding U.S. government debt supply. Bessent had previously said bringing down the 10-year yield was a policy priority for the administration, but the bond market’s move suggested that goal is facing a test.
Pooja Kumra, a rates strategist at TD Securities, said: “Bonds are facing a double hit — oil prices keep rising, while the U.S. buyback operation and rising credibility risk are pushing up the term premium.”
The 5% line on the 10-year yield became a focal point for equities
The 10-year Treasury yield is now close to 5%, a level many on Wall Street see as important for broader asset repricing.
Sam Stovall, chief investment strategist at CFRA Research, said: “I think 5% is a sentiment threshold. Once it breaks above that, investors will become increasingly uneasy, and that could lead to further weakness in the market.”
Rate-sensitive parts of the market already showed the strain. On Thursday, the Russell 2000 fell about 1% and the S&P 500 materials sector dropped 1.5%. So far this month, all three major U.S. stock indexes have posted declines.
The article also said some equity investors are, for now, looking past the bond selloff and waiting for Friday’s CPI report and next week’s Federal Reserve decision. Mark Hackett, chief market strategist at Nationwide, said: “If Friday’s CPI meaningfully misses expectations, will stocks slip into a more lasting decline? That is the bigger risk than the somewhat arbitrary 5% yield threshold.”