Bessent soothes bond market with Treasury repurchases

Stocks on Wall Street rallied after US Treasury secretary Scott Bessent’s liquidity programme to ramp up bond repurchases calmed bond markets, while minutes to the latest Federal Reserve policy meeting showed policymakers uneasy about the pace of inflation.

SpaceX ramped up the competition in the artificial intelligence market, with reports that the space and AI conglomerate approached coding startup Cognition AI about a potential acquisition, while OpenAI’s June quarter revenue growth was more modest than some investors hoped.

Pharmaceutical firm Moderna soared after trials showed promising results in a melanoma treatment in conjunction with Merck & Co’s Keytruda drug.

And Australian futures are pointing to a positive start in the antipodes in what’s a busy day for company reporting on both sides of the Tasman, including results from Spark New Zealand, Auckland International Airport, Fortescue and Super Retail Group.

Taming bonds

The yield on US 30-year government bonds fell 9 basis points to 5.2% at 7am in Auckland after the US Treasury said it would double the buyback sizes for 10- to 30-year Treasury debt securities to at least US$4 billion per operation.

Long-dated government bond yields hit multi-decade highs amid growing unease about the potential for elevated oil prices to fuel inflation, a growing appetite for debt-financing the AI build and fiscal deficits pushing up borrowing costs.

“The larger operations are intended to improve trading conditions in older, less-liquid off-the-run bonds rather than directly lower benchmark yields, although the timing was taken as a signal that officials are alert to pressure in long-end borrowing costs,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note.

Meanwhile, minutes to the last Federal Open Market Committee policy review showed several officials favoured a rate hike in July, with others signalling they’d back an increase if inflation didn’t improve.

Stocks on Wall Street rallied as bond markets calmed down, with the Dow Jones Industrial Average up 0.2% in late trading, with Merck & Co surging 13% to lead the blue-chip index higher.

Promising trial

Moderna soared 156% in late trading after results from an experimental mRNA-based treatment used in conjunction with Merck’s Keytruda cancer drug succeeded in reducing the return of melanoma after the cancer was surgically removed. It also slowed the spread to new areas of the body.

Separately, US President Donald Trump named White House policy aide Heidi Overton to head the Food and Drug Administration after the previous chief quit several months ago.

The S&P 500 gained 0.3% in late trading, with retailers Target and Lowe’s beating analysts’ earnings expectations, while the Nasdaq Composite was up 0.2%, with Marvell Technology among gainers after it signed an agreement with Alphabet’s Google giving the tech giant the right to buy as much as US$12.2 billion of its shares in exchange for buying chips.

SpaceX declined 3.4% in late trading after Bloomberg reported the conglomerate approached Cognition AI about a potential acquisition as the major AI players ramp up their bids to grab more of the market. Meanwhile, the Wall Street Journal reported OpenAI’s June quarter revenue grew 18% to US$6.7 billion, disappointing some investors wanting to see it make bigger inroads into the lead taken by Anthropic.

Meanwhile, the US Commodity Futures Trading Commission said it was seeking feedback on compute derivatives contracts as the AI boom drives demand for new products tied to computing power.

Bitcoin climbed 5.8% to US$68,380 at 7am as President Trump pushed legislators to pass a digital asset market structure law, and met with crypto executives in the White House.

Brent crude oil futures rose 0.4% to US$91.42 with the US and Iran still locked in a stalemate. The New York Times reported the US Navy was playing an increasingly important role helping tankers get through the Strait of Hormuz in recent months.

Bloomberg reported a tentative trade deal was reached between the US and Canada lowering tariffs on some Canadian exports of steel and aluminium to 25%.

And Nikkei Asia reported Singapore planned to expand an elite visa programme to attract top finance professionals to boost its asset management sector.

Australian futures were pointing to a 0.1% gain for the resources-heavy S&P/ASX 200 index when trading opens across the Tasman. Gold futures jumped 3% to US$4,552 an ounce after the US Treasury announced its bigger bond repurchase programme.

The kiwi dollar rose to 59.37 US cents at 7am from 58.73 cents yesterday, with the greenback broadly weaker after the Treasury announcement.

Greg Boland, market strategy consultant at Moomoo, said New Zealand’s S&P/NZX 50 index faced a mixed opening after its strength in recent days.

“The key question for investors is whether the Treasury's intervention can keep long-term yields contained while the Fed remains focused on inflation,” Boland said. “For technology investors, the US 10-year yield remains a critical indicator. A sustained move lower would provide some relief to growth stocks, while another move towards 5% would increase valuation pressure.”

The local stock exchange has a busy earnings day, with Spark, Auckland Airport, Heartland Group Holdings, NZX, SkyCity Entertainment Group, Seeka and Skellerup Holdings due to report.

Meanwhile, Pacific Edge and General Capital hold their annual meetings.

Reporting by Paul McBeth. Image from Connor Gan on Unsplash.