Why the Treasury is Buying U.S. Debt & Commercializing Gene Editing

**John Carteau** (0:00)
This episode is brought to you by Charles Schwab. Timing the market, fighting inflation, managing risk? Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites, and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab, can help.
Join host Mark Reapy as he breaks down practical strategies to help overcome the mental traps that may affect your investing decisions.
Listen at schwab.com/financialdecoder.

**Ann Berry** (0:33)
Target, Estée Lauder, two major turnaround stories getting a boost today, we break down what's working. CRISPR Therapeutics, developer of the world's first approved gene editing therapy. Sales are growing, so why is the company still losing money? We answer one listener's question. And interest rates, as the Treasury buys back government bonds in its latest move, we survey what's going on in Washington. For Wednesday, August 19th, it's Brew Markets Daily, and I'm Ann Berry.
More market details to come. But first, Treasury intervention. We've talked about it on the show before when it's caught our attention. So don't let your eyes glaze over yet. I know you want to, but do stick with us because these interventions are usually signs of bigger, interesting forces at work. Well, most recently, we talked about Treasury intervention when it comes to currencies. Thorsten Slock, Chief Economist at Apollo Global Management, joined us exactly two weeks ago to describe how the United States Treasury had just bought Japanese yen at scale. That was in a highly unusual attempt to prevent the Japanese government from selling US bonds, which in turn could push US interest rates up. Something which the White House does not want to see happening, especially in the run up right now to midterm elections. Well, today, another striking move came to light from the US Treasury, announcing that starting September 9th, it will double the maximum size of its buybacks of 10 to 30 year government bonds from $2 billion right now to at least $4 billion.
And here's the unusual part. Washington is doing this while simultaneously borrowing enormous amounts of new money. So the Treasury is effectively selling new bonds while buying back older ones, the question is why? Well, the official reason is market plumbing, that the Treasury simply wants to improve liquidity in older, as frequently traded bonds, it's an important market. But the timing here is notable. Long-term yields and so interest rates too have surged, as investors demand greater compensation for the risks of inflation, huge deficits and America's growing debt burden. The 30-year yield hit nearly 5.34% just yesterday, it's highest since 2007
Now, the Treasury stepping in as a buyer for some of those long dated bonds, props up their prices and as a result, should in theory ease the upward pressure on yields. Again, yes, you guessed it, to mitigate rising interest rate pressure. Well, US Treasury Secretary Scott Bessent is nothing if not savvy and certainly political, meaning this is just one person's view. It's that midterm sword of Damocles hovering over this new policy move too. And here's one more thing we're watching. Fed Chairman Kevin Warsh has expressed a preference in the open market, meaning one without interventions, to determine interest rates. Artificial suppression of yields by the Treasury could make the Fed's job of inflation control more difficult, and the Fed's next rate decision is in just four short weeks' time. Well, the market certainly reacted quickly to today's news. The benchmark 10-year note fell six basis points, while the 30-year long bond tumbled to 5.196%.
Coming off, again, that highest level since 2007 We're going to keep on watching. Coming up in a moment, a spin through the headlines and moving the markets today, including the back flipping robot maker that just soared in its public debut.
But first, this episode is brought to you by Charles Schwab.

**John Carteau** (4:11)
Could recency bias be skewing your potential stock picks? Do you feel attribution bias might be messing with your retirement plan? Sometimes overconfidence ends up overestimating our own abilities, or loss aversion kicks in and losing that dollar hurts way more than gaining one.
Financial Decoder, an original podcast from Charles Schwab, explains how these cognitive and emotional biases can affect the decisions you make about your financial life.

**Ann Berry** (4:33)
Host Mark Reapy, head of the Schwab Center for Financial Research and his guests of Actionable Insights on how to guard against decision-making biases. Download the latest episode and follow at schwab.com/financialdecoder or wherever you get your podcasts at schwab.com/financialdecoder.
Well, let's take a spin now through some of the headlines that have been moving the markets today, starting with earnings results, and shares in retailer Target, affectionately known as Tarjay, jumped over 5% that's after the company topped Wall Street's second-quarter estimates.