U.S. Treasury yields remained little changed in early European trade as investors weighed the prospects of increased buybacks of long-dated bonds and new sanctions against Iran. Reports suggested the Treasury might deploy its nearly $1 trillion general account to finance expanded buybacks, following last week's doubling of purchases to over $4 billion per operation from $2 billion. "The report does highlight that [Treasury Secretary Scott Bessent] has more tools to control the long end of the curve," said Jefferies' global economist Mohit Kumar. However, higher deficits and inflation risks keep Jefferies cautious about long-dated Treasurys.

Investors remained cautious ahead of the Kansas City Federal Reserve's annual symposium, where Fed Chairman Kevin Warsh is expected to address inflation plans. The 10-year U.S. Treasury yield traded flat at 4.701%, while the 30-year yield held steady at 5.229%. The 10-year German Bund yield edged up 0.2 basis points to 3.254%, and the 10-year U.K. gilt yield rose 0.2 basis points to 5.055%. Brent crude oil fell 0.8% to $91.47 a barrel.

Bessent announced new sanctions against Iran, warning of retaliation for countries doing business with the nation. "The geopolitical escalation adds a new layer of complexity heading into Jackson Hole," said Jesper Fjarstedt, senior analyst at Danske Bank. He expects Warsh to avoid definitive policy signals. The absence of clear forward guidance leaves the Fed's reaction function unusually uncertain, contributing to a steeper U.S. Treasury curve, said Gabriele Foa, global credit portfolio manager at Algebris. "That runs somewhat against what Bessent has been trying to achieve through lower long-term yields," he noted.

Any buybacks of long-dated debt will increase the U.S. Treasury's risk profile, said Christoph Rieger, head of rates and credit research at Commerzbank. "The Treasury will soon be facing an interest bill of above $100 billion each month," he warned. Long-term measures need accompanying fiscal consolidation to keep yields down, added ING's Padhraic Garvey, who noted that expanding buybacks could help long-dated bonds, but financing through the general account may not have material impact.