Gold may stay attractive as US Treasury caps long-term yields: Jefferies

Gold may remain attractive as US Treasury seeks to contain long-term borrowing costs: Jefferies

New Delhi, September 4

In a report, Jefferies said the US Treasury's focus on controlling long-term yields had become increasingly important for financial markets, even as investors continue to track the Federal Reserve's interest-rate decisions.

US Treasury Secretary Scott Bessent has indicated that the government could increase bond buybacks at the longer end of the Treasury curve and potentially use funds from the Treasury General Account to purchase longer-dated bonds.

Jefferies noted that the 10-year US Treasury yield was at 4.77 per cent, close to what it described as Bessent's perceived 4.75 per cent "line in the sand". This suggests that efforts to contain borrowing costs were having some impact for now.

However, the brokerage cautioned that such measures could have wider implications for the US dollar and fixed-income markets.

Jefferies said efforts to control Treasury yields could be inflationary in terms of their impact on the dollar and could raise concerns that the government's priority was to reduce the cost of servicing its debt.

Against this backdrop, the brokerage expects long-term US Treasury bonds to remain in a structural bear market and sees further support for gold and gold-mining stocks if yields are increasingly influenced by policy rather than market forces.

The report also pointed to continued inflationary pressures in the US. Headline CPI and core PCE inflation have remained above the Federal Reserve's 2 per cent target for 65 months.

At the same time, US nominal GDP growth has accelerated to a 5.7 per cent trend rate over the past 12 quarters, compared with 4.7 per cent in the three years leading up to 2019, Jefferies said.

The brokerage said the next US Consumer Price Index (CPI) reading, due on September 11, would be closely watched as it could influence the Federal Reserve's policy decision in September.

Markets were pricing in a 15-basis-point rate hike in September and 37 basis points of tightening by the end of 2026, according to the report.

Jefferies also highlighted rising borrowing by US hyperscalers. These companies have issued USD 223 billion of bonds so far in 2026, more than double the USD 108 billion raised during 2025.

The higher level of corporate bond issuance adds to competition for long-term funding and could further influence the US Treasury market, the brokerage said.

— ANI