U.S. Treasury Doubles Buyback Size; Global Yields Fall and Stock Futures Rise

On the 19th (local time), following the U.S. Treasury Department's announcement that it would at least double the scale of its repurchase of long-term government bonds, surging yields plummeted and New York stock index futures rose across the board. Dow Jones Industrial Average futures rose 272 points (0.51%), S&P 500 futures rose 0.45%, and the tech-heavy Nasdaq 100 futures rose 0.5%, showing strength in pre-market trading.

The Treasury Department announced it would at least double the scale of buybacks for long-term Treasuries in the 10-20 year and 20-30 year tranches. Long-term bond yields plunged immediately after the announcement. The yield on the U.S. 30-year Treasury, which surpassed 5.33% the previous day to mark its highest level in 19 years, fell 9bp (1bp=0.01%) to 5.196% on the day. The benchmark 10-year Treasury yield also dropped 6bp to 4.647%.

As the U.S. Treasury doubled the size of its long-term bond buybacks to support liquidity in the long-term bond market, growth stocks, which had been under pressure from high interest rates until the previous day, entered a rebound phase. The surge in long-term rates had pressured high-valuation tech stocks and AI-related stocks, causing the S&P 500 to fall for three consecutive days until the previous day, but growth and semiconductor stocks are attempting a rebound alongside the decline in long-term rates.

Marvell Technology stood out among semiconductor stocks. Marvell surged more than 12% in pre-market trading after announcing a contract related to Google's Tensor Processing Unit (TPU). Regarding this contract, Marvell granted Google a warrant to purchase up to approximately 59 million shares of its common stock.

Moderna rose the most among individual stocks. Moderna surged more than 80% in pre-market trading after the cancer vaccine it developed with Merck met its main goals in a late-stage clinical trial. Merck shares also rose more than 7%, bolstering the rise in Dow futures.

The day's market moves suggest that the valuation pressure triggered by the global surge in long-term rates the previous day has come to a halt, with expectations for earnings highlighting the AI and pharmaceutical/bio sectors amid the Treasury's liquidity support.