On Aug. 25, markets produced an unusual mix: U.S. Treasuries, gold and Bitcoin all rose, the dollar stayed firm, oil prices retreated and technology stocks remained under pressure.
Two policy signals sat at the center of the move. First, U.S. Treasury Secretary Scott Bessent signaled that the Treasury may use cash from the Treasury General Account, or TGA, to help fund expanded buybacks of long-dated government bonds. Second, the U.S. approach toward Iran appeared to shift, at least for now, toward economic sanctions rather than a broader military escalation.
Together, those developments pushed down long-end Treasury yields and oil prices while supporting gold and crypto assets. Stocks did not follow in a broad rally, though. Ongoing weakness in AI and semiconductor names continued to weigh on the Nasdaq.
TGA expectations become a new variable for Treasuries
The U.S. Treasury had already announced expanded buybacks for bonds in the 10-year to 30-year sector. At first, the market read that as a maturity-management move similar to an “Operation Twist” style adjustment: issue more short-dated Treasury bills while repurchasing longer-dated debt to alter the maturity profile.
The newer element is the idea that the Treasury might not need to rely on fresh short-term issuance and could instead draw directly on TGA cash held at the Federal Reserve.
Morgan Stanley rates strategist Martin Tobias estimated that the Treasury could pull $80 billion to $200 billion from the TGA to expand bond buybacks. Relative to the buyback amounts already disclosed, that potential funding source is much larger, which is why some traders see it as a more forceful tool for stabilizing the long-bond market.
Long-dated Treasuries outperformed on that expectation, and the yield curve flattened. At the same time, market pricing for rate hikes in 2026 actually edged up to about 27.4 basis points. That suggests the rally in long bonds was driven mainly by supply-demand and policy expectations, not by a sudden shift into a full-market easing trade.
The report also noted that using the TGA to fund buybacks remains a matter of media reporting and market extrapolation, not a confirmed Treasury plan. Even if implemented, the direct effect would be to improve liquidity and alter the stock of tradable bonds in the market, not to replicate Federal Reserve quantitative easing.
Buybacks may support liquidity, but not solve long-end rate pressure
Wall Street remains split on whether larger buybacks can materially lower long-term yields.
Institutions including Goldman Sachs and Wells Fargo argue that expanded buybacks do not address the main reasons long-end yields have moved higher in recent weeks. Goldman Sachs strategists George Cole and William Marshall said that even a larger buyback program may not be enough to meaningfully reset rate levels.
Pressure on long-dated Treasuries still reflects a combination of fiscal deficits, government bond supply, sticky inflation and term premium. The Treasury can use buybacks to improve liquidity in some older issues and can help supply-demand conditions at the margin, but it cannot directly reduce the government’s financing needs.
Strategists at Societe Generale, Deutsche Bank and Scotiabank expect the yield curve could steepen again as long-term yields continue to rise relative to short-term yields. That also helps explain why Goldman Sachs’ “stagflation stock basket” has continued to outperform lately: the market is pricing short-term policy support on one side while still assigning value to longer-run fiscal and inflation risks on the other.
In that reading, expectations for TGA-funded buybacks amount to an added layer of liquidity protection for the long-bond market rather than a clean reversal in the rate trend.
Iran risk shifts, for now, toward economic pressure as oil gives back premium
The decline in oil came from a separate policy thread.
Several reports said tanker traffic through the Strait of Hormuz was recovering under U.S. protection. Axios, citing U.S. officials, reported that about 40 tankers carrying roughly 16 million barrels of crude passed through the southern channel and exited the strait on Friday night. Kpler data showed another 30 vessels moved through Hormuz over the weekend, while 83 ships passed through the Bab el-Mandeb Strait.
Iran questioned the scale of that traffic recovery, but the oil market, at least for the moment, chose to trade the reopening signal.
Later, the United Kingdom Maritime Trade Operations office reported that a Saudi tanker was attacked in the Red Sea, briefly lifting oil prices. But prices turned lower again after Bessent said the U.S. would launch an “economic D-Day” against Iran, targeting third-party institutions that buy and transport Iranian oil.
Markets interpreted that language to mean Washington currently prefers secondary sanctions aimed at cutting Iran’s oil revenue rather than direct military escalation. Compared with attacks on energy infrastructure or a blockade of shipping lanes, economic sanctions imply a more limited immediate hit to physical global crude supply.
Still, that more optimistic pricing remains fragile. The report said Iran has previously used shadow fleets and intermediary trade to evade sanctions and has already threatened retaliation against countries that support the U.S. plan. If shipping is disrupted again, the crude risk premium could return quickly.
Lower crude does not mean energy inflation is gone
Falling crude prices also do not mean energy inflation risk has disappeared.
Shipping risks in the Strait of Hormuz and the Red Sea are still affecting refined-product flows, while Ukrainian drone strikes have constrained Russian fuel supply. At the same time, global refining capacity has emerged as a new bottleneck, leaving diesel and other refined products elevated relative to crude.
TotalEnergies management said the outlook for crude has turned more bearish as cargoes gradually resume transit through Hormuz. But with refined-product supply still tight, prices for diesel and gasoline may stay strong.
That points to a shift in how energy inflation is transmitted. Concerns over crude shortages have eased somewhat, but refining and transport bottlenecks can still feed through into corporate costs and consumer inflation via refined-product prices.
Falling yields fail to lift tech stocks
Compared with the gains in bonds, gold and Bitcoin, U.S. equities showed a clear split.
South Korean technology stocks weakened first. Samsung announced the largest shareholder return plan in its history, but the package still fell short of market expectations, and the pressure then spilled into U.S. semiconductor and AI shares. Most major U.S. indexes fell, with only the Dow Jones Industrial Average posting a gain, helped by financial stocks. The Nasdaq led the declines.
By sector, consumer staples and financials were relatively resilient, while both technology and energy dropped more than 1%. Core AI trading groups, including optical communications and semiconductors, broadly moved lower.
Nvidia has now fallen for seven straight sessions, its longest losing streak since September 2022. Its credit default swap spread also climbed to a record high. With Nvidia earnings, the Jackson Hole central bank gathering and fresh U.S. policy headlines arriving in close succession, investors have been actively reducing risk exposure.
One more detail stood out: index volatility rose as the broader market fell, while single-stock volatility eased. That divergence suggests investors are more concerned about macro policy and sector-level systemic risk than about an isolated event at any one company.
The main market theme of the day was neither a pure safe-haven trade nor a simple easing trade. Treasury buyback expectations improved long-bond supply and demand conditions, the de-escalation of Iran risk pulled oil lower, and gold and Bitcoin benefited from falling real yields and policy uncertainty. Tech stocks did not rebound alongside them, a sign that the AI trade is moving out of its liquidity-driven phase and into a period where earnings, valuation and returns on capital spending are being tested more directly.