Shares in leading semiconductor firms rallied as news of potential US Treasury bond buybacks eased long-term yields, sparking a short-term revival in rate-sensitive tech stocks amid ongoing concerns over inflation and fiscal deficits.
Semiconductor shares recovered on Tuesday as a fall in long-term US Treasury yields helped reverse part of the previous session’s sell-off. The VanEck Semiconductor ETF rose 1.65% to $555.82, with the move driven less by company-specific news than by a report that the Treasury Department could use cash in its general account to support bond buybacks. CNBC’s Dominic Chu said the 10-year Treasury yield, which had been near 4.66%, eased after the report, pulling investors back into chips and memory stocks.
The Treasury General Account is the government’s operating balance at the Federal Reserve, and it recently stood at about $933 billion. Market participants interpreted the buyback reports as a sign that the Treasury may reduce net bond supply by repurchasing some longer-dated securities rather than issuing as much new debt. That is distinct from Federal Reserve bond buying, because it does not create new reserves; it merely reallocates the government’s existing cash. The immediate effect has been to ease pressure on yields, at least for now.
Axios reported that Treasury Secretary Scott Bessent has already announced buybacks of at least $4 billion in longer-term securities, and that move has helped push the 30-year yield down from a recent high of 5.31% on August 17 to about 5.19% by August 26. Kiplinger said the 10-year yield fell to 4.639% and the 30-year to 5.185% after the announcement, while the broader US stock market ended a three-day losing run. Yet scepticism remains. Analysts cited by AP and Axios said the intervention may be too small to offset deeper concerns over inflation, heavy borrowing and large fiscal deficits.
Among semiconductor names, Advanced Micro Devices, Marvell, Intel and Micron all benefited from the bounce in rate-sensitive equities. Marvell extended a strong monthly run, while Intel lagged slightly because of its lower valuation and lingering uncertainty around the CHIPS Act equity stake issue. The wider question for investors is whether this is a durable shift or just a short-lived reaction to lower yields. As several market observers noted, rate-driven rallies can fade as quickly as they form if the Treasury does not follow through or if bond traders decide the structural problems behind higher borrowing costs have not changed.
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