The U.S. Treasury Department, led by Secretary Scott Bessent, announced a plan to "at least double" its debt buyback operations, increasing the maximum size from $2 billion to at least $4 billion. This accelerated buyback will target the 10- to 20-year and 20- to 30-year portions of the market, effective from September 9 through November 4. The Treasury stated this move aims to provide greater liquidity in these longer-dated nominal sectors, which have experienced a "buyers' strike" since late June.
The announcement led to an immediate market reaction: yields cratered, and stock market futures rose sharply. The benchmark 10-year note saw its yield close down 5.7 basis points to 4.647%, while the 30-year "long" bond tumbled 9 basis points to 5.196%. Yields on the 30-year Treasury bond plunged from 5.26% to as low as 5.18%, and 10-year yields dropped from 4.68% to as low as 4.63%. U.S. stocks also initially traded higher, with the S&P 500 closing up 0.2% and the Nasdaq Composite up 0.16%.
However, some analysts expressed skepticism about the long-term impact. Krishna Guha, head of global policy and central bank strategy at Evercore ISI, noted that while it might provide near-term relief and discourage short-selling, it "changes almost nothing in terms of the fundamentals," specifically the ongoing need to finance large government deficits and hyperscaler debt. Joe Brusuelas, RSM's chief economist, suggested the move could complicate the Federal Reserve's efforts to control inflation, stating Bessent's interest is "purely short term and is organized around the upcoming election."
Mohamed El-Erian, an economist, described the planned purchases as "small in both absolute terms and relative to net issuance," suggesting it was more akin to "a broader deployment of 'yield curve control'." He also warned of potential "collateral damage and unintended consequences," emphasizing that the effects are "short dated unless followed by fundamental policy adjustments." The move effectively recalls the Fed's "Operation Twist," though on a much smaller scale, with Barclays strategists estimating an additional $16 billion in purchases per quarter, or $64 billion annually, representing about 15% of the current annual supply of 20- and 30-year bonds.
