Last week, a global bond selloff drove 30-year yields to multi-decade highs, fueled by Middle East tensions, rising oil prices, inflation expectations, and fiscal sustainability concerns. Meanwhile, the US national public debt surpassed US$40 trillion for the first time. Reacting to these uncertainties, investors demanded higher-term premiums for holding long-term debt, with the 30-year US Treasury yield briefly closing above 5.30%—the highest level since 2007—before finishing the week 1 basis point higher at 5.27%.

Amidst rising long-term yields putting pressure on government borrowing costs, US Treasury Secretary Scott Bessent announced a doubling of long-dated bond buybacks for Treasuries ranging from 10 to 30 years. This increases the current maximum of US$2 billion to at least US$4 billion per operation, which provides greater liquidity support for longer-dated debt securities. The buyback announcement initially triggered higher US bond prices and effectively lowered long-term yields. However, bond markets later shrugged off the buyback news and yields retraced. Many investors weighed the interventionary move as treating a symptom rather than the underlying structural issue, namely rising government debt levels that require an ongoing issuance of bonds to finance persistent deficits. 

In corporate bond news, August has already set a new record for US corporate investment-grade issuance, surpassing the August 2020 peak of US$136 billion, according to Bloomberg. The financial, communication, and technology sectors fueled this volume, as companies capitalized on historically tight credit risk spreads to lock in long-term financing. Within the technology space, hyperscalers were particularly active, tapping debt markets to secure capital for long-term AI infrastructure projects—most notably led by Alphabet Inc.’s US$25 billion 10-part bond offering this month, which attracted strong investor demand of roughly US$115 billion. The sheer scale of this new hyperscaler supply, often targeting longer-term bonds, continues to contribute to upward pressure on long-end yields and test public debt market absorption capacity.

In Canada, July headline consumer price index (CPI) inflation data accelerated to 3% year-over-year, just above estimates of 2.9%, driven primarily by rising gasoline prices and travel costs. However, the core CPI-trim metric—excluding volatile energy and food prices—rose at a modest 1.9% pace. This remains below the Bank of Canada’s 2% target, suggesting broader inflationary pressures are currently contained. Swap markets are currently pricing in a full 25-basis-point rate hike by the Bank of Canada at the January 2027 meeting, with a 60% probability.