Rising Yields and Fiscal Jitters Snap the Rally
August 24, 2026
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Last week, the rates market drove the tape rather than earnings, and the message was less comforting. Long-term Treasury yields pushed to multiyear highs on fiscal-sustainability concerns, crowded supply and firmer oil, dragging equities lower.1 The S&P 500 Index fell roughly 1.4% and the Nasdaq Composite Index dropped about 2%, with the 10-year Treasury yield climbing roughly four basis points to 4.74%, near its highest level of the year.2 The July Federal Open Market Committee (FOMC) minutes reinforced a patient-but-hawkish posture.3
This morning’s headlines that the Treasury could use its nearly $1 trillion in cash in its General Account to fund bond buybacks are driving a modest rally in Treasuries.4 This follows last week’s most interesting development, on Wednesday, when Treasury Secretary Scott Bessent announced the Treasury would at least double long-term debt buybacks to $4 billion or more per operation to support liquidity.5 Yields eased midweek on the news before backing up again into Friday—an early test of whether a "Treasury put" can cap yields when the underlying pressure is tied to strong economic growth and fiscal concerns. Credit held up relatively well, with the Bloomberg U.S. Aggregate and Credit indexes essentially flat.6 Retail earnings were mixed: Lowe's firmed while Walmart slid on its slowest U.S. sales growth in more than six years.7,8 Gold and oil both rallied as debt worries and renewed Iran tensions dominated.9,10
The week ahead is a true test. Wednesday is the busiest session, pairing the July Personal Consumption Expenditures (PCE) price index with the second estimate of second-quarter Gross Domestic Product (GDP) and Nvidia's earnings after the close, a fresh test for the artificial intelligence (AI) trade.11,12 Also on the calendar: consumer confidence and new home sales on Tuesday, durable goods on Wednesday and the Jackson Hole symposium (Aug. 27–29), where Federal Reserve Chair Kevin Warsh's keynote will be scrutinized for the September path.13,14 Warsh’s Friday keynote may offer more clarity to the bond market, which earlier in the week must also digest heavy supply—$69 billion 2-year, $70 billion 5-year and $44 billion 7-year note auctions—a real gauge of demand amid the fiscal angst.15 For fixed-income investors, the question is whether cooling PCE can pull the long end back before supply and fiscal worries set a higher floor under yields.
Sources:
1,2,6,10Bloomberg
3CNBC – Fed officials saw need for rate hike if inflation doesn’t cool, minutes show; 8/19/26
4CNBC – Bessent could tap near $1 trillion Treasury General Account to fund bond buybacks, sources said; 8/24/26
5CNBC – Treasury doubles debt buybacks as Bessent moves to steady bond market; 8/19/26
7Lowe’s – Lowe's Reports Second Quarter 2026 Sales and Earnings Results; 8/19/26
8AP News – Walmart is cautious with expectations after slowest sales growth in 6 years; 8/20/26
9CNBC – Gold rebounds as bond jitters, debt fears and weaker dollar revive bullion demand; 8/21/26
11,13MarketWatch – Economic Calendar; as of 8/24/26
12Kiplinger – Earnings Calendar and Analysis for This Week (August 24-28)
14Federal Reserve Bank of Kansas City – Jackson Hole Economic Policy Symposium, August 27–29, 2026
15TreasuryDirect; as of 8/24/26
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