US Treasury Secretary Scott Bessent has taken steps to reduce long-term borrowing costs, which had reached multi-year highs. Just two weeks after announcing its quarterly buyback schedule, the Treasury Department stated on Wednesday that it would "increase, by at least double, the size of liquidity support buyback operations" for securities maturing in 10 to 30 years. This announcement led to a decrease in Treasury yields and the dollar.
The move is aimed at addressing a "buyers' strike" in the 10- to 30-year portion of the market since late June. The Treasury will increase the maximum size of its buyback operations from $2 billion to at least $4 billion, starting September 9 and continuing through November 4. This accelerated buyback will make the Treasury a larger buyer of older, longer-duration debt, providing liquidity to a market segment that traditionally has strong demand.
The announcement had an immediate impact on the market. The benchmark 10-year note yield dropped by 5.7 basis points to 4.647%, while the 30-year "long" bond yield fell by 9 basis points to 5.196%. Stock market futures surged following the news. President Donald Trump commented that Americans should not be worried about the bond market.
However, some analysts expressed skepticism about the long-term impact. Krishna Guha of Evercore ISI noted that while the move could help attract buyers and deter short-selling, it doesn't address the fundamental need to finance large government deficits and the "tidal wave of hyperscaler debt." Joe Brusuelas, chief economist at RSM, suggested that Bessent's actions are short-term and politically motivated, potentially making the Federal Reserve's job of controlling inflation more difficult. Mohamed El-Erian described the purchases as "small in both absolute terms and relative to net issuance," suggesting it's more about "yield curve control" than fundamental change.
