The U.S. Treasury Department announced it would at least double the size of its buyback operations for longer-dated nominal coupon securities, specifically targeting the 10- to 20-year and 20- to 30-year portions of the market. The maximum size of these operations will increase from $2 billion to at least $4 billion, a move aimed at providing greater liquidity support in sectors that have seen a "buyers' strike" since late June. This change, led by Secretary Scott Bessent, will take effect on September 9, 2026, and continue through November 4, 2026, the day after the midterm elections.
Following the announcement, yields on longer-term bonds saw a significant drop. The benchmark 10-year note closed down 5.7 basis points to 4.647%, while the 30-year "long" bond tumbled 9 basis points to 5.196%. This action by the Treasury is seen as an attempt to suppress yields that had been rising due to concerns about persistent inflation, higher oil prices from the war with Iran, the U.S. budget deficit, and a higher term premium demanded by investors. The immediate effect was a lowering of longer-term yields, which had been at their highest levels in years.
Analysts have offered mixed reactions to the Treasury's move. Krishna Guha of Evercore ISI noted that the stepped-up operation "can help crowd in potential buyers" and "force some near-term short-covering," but also cautioned that it "changes almost nothing in terms of the fundamentals" regarding large government deficits and the need to finance "hyperscaler debt." Joe Brusuelas, chief economist at RSM, criticized the move as a "political actor" Bessent's short-term interest, potentially making the Federal Reserve's inflation control more difficult by artificially suppressing yields. Mohamed El-Erian described the planned purchases as "small in both absolute terms and relative to net issuance," suggesting it's more about "yield curve control."
The decision to increase buybacks follows a sharp bond selloff that pushed the 30-year Treasury yield to its highest since 2007, climbing to a 19-year high of 5.34% before retreating after the announcement. The move is also seen as the Treasury addressing the risk of debt-market pressures leading to higher borrowing costs and broader financial-market disruption. This marks the second time this month that Secretary Bessent has intervened in markets, following a currency-market intervention with Japan on August 1 to reverse the yen's fall.
While the increased buyback is intended to improve liquidity and provide short-term relief, its long-term impact is debated. The additional $2 billion per operation is considered modest compared to the $32.2 trillion Treasury debt market and the $5.5 trillion in outstanding 20-year and 30-year bonds as of July 31. Despite the immediate positive market reaction, some experts question whether the operation will have a lasting effect given the underlying fiscal challenges.
