Last Updated on 23/09/2026
The Treasury purchased $5.2 billion of its own long-dated bonds but failed to prevent yields from moving higher. A week later, the Federal Reserve raised interest rates, yet silver continued to climb. Both moves point to the same underlying rule.
Silver in 2026 appears to be responding more closely to long-term interest rates and the oil prices that influence them than to the size of the fiscal deficit. When long-term yields rise, silver tends to weaken regardless of Treasury intervention. When yields decline, silver can recover even during a week when the Fed raises rates. The past week provided a clear example, with the metal responding within days as yields eased.
This also challenges the idea that a widening deficit automatically supports silver prices. The fiscal deficit deteriorated during September while silver declined, before the metal recovered as bond yields moved lower. The next major test could come in early November, when the Treasury’s current round of expanded buybacks is scheduled to end.
Silver was trading at around $65.38 an ounce early on September 22, compared with gold at $4,322.95, putting the gold-silver ratio at approximately 66.1. Silver was 4.5% higher than its September 16 level, the day the Federal Reserve increased its policy rate by 25 basis points to a range of 3.75%–4.00%. Fed projections pointed to one additional rate increase before the end of the year.
Despite the recent rebound, silver remained about 8% below its level at the start of 2026 and roughly 46% below its January peak of $121.58. The move following the Fed decision coincided with the 10-year Treasury yield falling back below 5% while oil prices also eased. Brent crude declined from above $105 toward $104 as reports indicated that Saudi Arabia was working to restore its East-West pipeline.
The Treasury Bought $5.2 Billion of Long Bonds, Yet Yields Still Rose
The previous analysis proposed that silver might respond less to fiscal stress itself and more to how policymakers respond to that stress.
The theory was straightforward. If the Treasury or Federal Reserve intervenes to keep borrowing costs lower, investors could interpret that action as monetary financing of the deficit, potentially supporting demand for silver as a hedge against currency debasement.
August appeared to support that idea. On August 19, the Treasury announced plans to at least double the size of its buybacks of long-term government bonds. Through these operations, the Treasury repurchases its own debt from dealers. Following the announcement, the 30-year Treasury yield declined, while silver gained 14.9% during August based on Sprott Money’s series.
The first major test came on September 10. The Treasury conducted the first enlarged buyback, targeting bonds maturing in 10 to 20 years. The operation had a $6.0 billion maximum and resulted in $5.2 billion of purchases.
Despite the larger-than-before operation, long-term yields continued to rise. The 30-year yield had fallen to 5.196% when the expanded buyback program was announced, but climbed to 5.353% by September 14. Meanwhile, the 10-year yield briefly reached 5% for the first time since 2023. Silver declined 4.8% over the two-week period.
Importantly, the fiscal situation had not improved. The August Monthly Treasury Statement showed the federal deficit reaching $1.966 trillion during the first 11 months of the fiscal year, while interest payments on the national debt surpassed $1 trillion for the first time.
Instead, the key changes came from inflation and energy prices. A stronger-than-expected jobs report was released on September 4, followed a week later by hotter-than-expected core inflation. Together, those developments increased expectations of a September rate increase.
The 2-year Treasury yield, which is particularly sensitive to expectations for Federal Reserve policy, climbed by roughly 30 basis points. At the same time, Brent crude rose from around $95 to above $105 after Saudi Arabia shut its main export pipeline. Higher oil prices increased concerns about future inflation, while the resulting shift in rate expectations weighed on silver.
Why the Treasury Buybacks Could Not Hold Yields Down
Two details help put the Treasury’s buyback operation into perspective.
First, dealers offered $10.5 billion of bonds against the $6 billion purchase limit. That was less than twice the available capacity. Earlier in the year, smaller operations had reportedly attracted offers close to ten times their respective limits. As the Treasury increased the size of the program, the amount of bonds offered did not increase proportionally.
Second, the Treasury’s stated objective for expanding the program was to support liquidity and trading conditions in a segment of the bond market where dealers already play an important role. It was not presented as a response to a collapse in demand for long-term government bonds.
The mechanics of the program also explain why it has limited power to suppress yields when the Fed is moving toward tighter policy. The Treasury finances its bond purchases by issuing additional short-term Treasury bills, meaning the overall national debt does not decline. Instead, its maturity profile shifts toward shorter-term debt.
The Federal Reserve does not purchase the bonds through this operation. Its separate purchases of Treasury bills for managing bank reserves had remained at zero since mid-August. As a result, the Treasury operation does not represent a direct injection of new money into the financial system. It is essentially an exchange of longer-term debt for shorter-term debt conducted by the Treasury.
The bond market appears to have treated it accordingly.
What Happened After the Fed’s Rate Decision
The Federal Reserve raised rates on September 16 and signaled another increase before year-end. Yet silver moved higher.
Rather than contradicting the earlier argument, the move fits the same framework. Oil prices declined as reports emerged of progress involving the Saudi pipeline and renewed discussions with Gulf states. Lower energy prices reduced some inflation concerns, helping push bond yields lower.
The 10-year Treasury yield, which had been above 5% the previous week, fell back toward 4.93% by September 18. Silver moved higher at the same time.
This distinction is important: silver rose even though the Fed’s policy rate increased because longer-term yields were moving in the opposite direction. In other words, the metal appeared to be responding more closely to the bond market’s expectations than to the Fed’s headline policy rate.
The Next Test for Silver
One important variable has yet to provide a definitive answer. The 30-year Treasury yield, at around 5.29%, remained above the 5.196% level recorded when the Treasury announced its expanded buybacks in August.
The Treasury’s current series of enlarged operations is scheduled to continue through November 4. By then, there should be enough additional observations to assess whether long-term yields respond meaningfully to Treasury buying or remain primarily driven by Federal Reserve policy, inflation expectations and other market forces.
If long-term yields remain above their August level while silver fails to respond, the earlier debasement argument would require significant qualification. Conversely, if yields decline during the buyback period and silver rises alongside them, the August relationship would receive further support.
The key condition is whether Treasury intervention can influence long-term borrowing costs when Federal Reserve policy is moving in the opposite direction.
What This Means for Silver Investors
Silver may respond to fiscal stress when markets believe that the stress is being financed through monetary expansion or policies that suppress long-term borrowing costs. That perception was more plausible while the Federal Reserve was holding rates steady and Treasury buybacks were pushing long-term yields lower.
Once the Fed began tightening, short-term rates adjusted first and the bond market continued to determine long-term borrowing costs. The Treasury’s buybacks therefore had limited ability to offset the broader shift in rate expectations.
The latest move in silver highlights the other side of the relationship. When long-term yields decline, whether because of lower oil prices, changing inflation expectations or other factors, silver can rise even while the Federal Reserve is raising its policy rate.
For silver investors, this provides a potentially simpler framework for interpreting short-term price movements. Long-term Treasury yields and oil prices may offer more immediate clues than the headline size of the federal deficit.
That does not eliminate the longer-term debate over fiscal deficits and potential currency debasement. Instead, September’s price action suggests that the market may process that fiscal story through the bond market first. Long-term yields respond to changing inflation and policy expectations, and silver then reacts to those changes.
The next significant test will come from the Treasury’s expanded buyback program. By the time the current series ends in early November, there should be more evidence on whether long-term yields respond to Treasury demand or remain primarily influenced by broader monetary-policy and market forces.
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