For all the US Treasury's efforts to stem rising borrowing costs, cooling inflation remains the most compelling way to lower bond yields, according to Goldman Sachs Group Inc. The effects of the Treasury's plans to boost debt buybacks are likely to prove "relatively short-lived" without a shift that addresses the underlying US macro drivers, strategist Friedrich Schaper wrote in a note.

The US Treasury has been intervening to manage debt markets, but Goldman Sachs argues that sustainable yield reduction requires addressing fundamental inflationary pressures rather than relying on technical market operations. Schaper's analysis suggests that buyback programs may provide temporary relief but fail to resolve structural issues driving long-term rates higher.

Market participants are closely watching inflation data for signs of sustained deceleration, which would provide the most durable path to lower bond yields. The strategist emphasizes that macroeconomic fundamentals ultimately dominate over Treasury intervention in determining the trajectory of US borrowing costs.