The U.S. Treasury Department, under Secretary Scott Bessent, announced an increase in its debt buyback operations for longer-dated bonds, specifically targeting the 10- to 20-year and 20- to 30-year sectors of the market. The maximum size of these operations will at least double from $2 billion to "at least" $4 billion, effective September 9 through November 4. This decision aims to provide greater liquidity in a part of the market that has experienced a "buyers' strike" since late June, and historically shows strong demand.
This aggressive move to address rising long-term yields has been met with mixed reactions from analysts. Krishna Guha, head of global policy and central bank strategy at Evercore ISI, stated that while the operation might "crowd in potential buyers" and deter future short-selling, it "changes almost nothing in terms of the fundamentals" like the need to finance large government deficits and "hyperscaler" debt. Joe Brusuelas, RSM's chief economist, criticized the move as a "political act" focused on the upcoming election, potentially making the Federal Reserve's job of controlling inflation more difficult by artificially suppressing yields. Mohamed El-Erian described the planned purchases as "small" relative to net issuance and indicative of a "broader deployment of 'yield curve control.'"
Some analysts remain skeptical about the long-term impact. Ryan Swift, Chief US Bond Strategist at BCA Research, noted that while the market saw an initial drop in 30-year U.S. bond yields by almost 10 basis points to 5.188%, these measures are likely to only move bond yields temporarily. He highlighted that the Treasury's ability to suppress long-dated yields by shifting issuance to the front-end is limited. Peter Boockvar, a market strategist, emphasized that this is "NOT a debt paydown" but a rearrangement of the maturity schedule, which could potentially increase the government's interest expense. Standard Chartered economist Steve Englander added that investors require an improvement in the deficit outlook, or factors like a resolution to the Iran war or a slowing economy, for a sustained reduction in long-term rates.
