On August 19, 2026, US Treasury Secretary Scott Bessent took action to control long-term borrowing costs by announcing a significant increase in debt buybacks. This move, targeting securities with maturities from 10 to 30 years, aims to rein in multi-year high Treasury yields and subsequently led to a decline in the dollar. The Treasury Department stated it would "increasing, by at least double, the size of liquidity support buyback operations" for these longer-dated securities.
This decision came just two weeks after the initial release of the buyback schedule for the current quarter. The intervention caused long-dated Treasuries to rally, with the 10-year yield falling to as low as 4.63% after reaching 4.74% recently, and the 30-year bond yield dropping to 5.196% from 5.26%. The action was interpreted by many in the markets as a strong signal of Bessent's consistent efforts to reduce the 10-year Treasury yield.
The stated purpose of these buybacks is to enhance market liquidity for less-traded instruments, specifically by removing older, less liquid "off-the-run" securities from the market. This strategy is intended to free up institutional balance sheets, encouraging them to purchase more liquid issues and potentially pushing rates down. The increased buyback operations are set to begin on September 9 and continue through November 4.
While the move successfully reversed a bond selloff, some analysts express skepticism about its long-term impact. Critics warn that this strategy could accelerate inflation, shift more borrowing towards short-term bills, and pressure the Federal Reserve, led by Chairman Kevin Warsh, to support fiscal policy. Economists like Mohamed El-Erian and Joe Brusuelas suggest that while the immediate effect might be a reduction in mortgage rates, the underlying issues of large fiscal deficits and the need to finance significant debt remain, making the sustained impact uncertain.
