Treasury Secretary Scott Bessent stated that the government's recently announced debt buyback program, which aimed to double scheduled buybacks to at least $4 billion per operation, could exceed that amount. He emphasized that the Treasury intends to "make a market" in longer-dated securities where yields have been surging, and that the ultimate size of the buybacks will depend on market conditions. This announcement followed an earlier move where the Treasury doubled its scheduled $2 billion buybacks of longer-dated government debt.
Bessent, a former hedge fund manager, told CNBC that the current high yields do not reflect market fundamentals and that liquidity, particularly in the 30-year bond, is "very poor." He suggested that the buybacks are part of a broader "toolkit" the Treasury has to address market conditions. The objective is to encourage focus on fundamentals rather than temporary market fluctuations during what he described as a quiet period with thin trading.
The remarks caused a brief easing in yields, with the 30-year bond and benchmark 10-year yield temporarily pulling back before heading higher again. The 30-year yield was most recently trading around 5.235%, and the 10-year yield was up about 5 basis points to 4.704%. Analysts at Jefferies suggested that against a $32 trillion market, even the upsized purchases might be too small to significantly alter the supply-demand balance.
Bessent highlighted several factors contributing to higher yields, including surging U.S. debt and deficits, competition from corporate debt issuance (especially in AI), higher yields from other sovereigns like Japan, and escalating term premiums. He also mentioned that the decision to buy back debt was not driven by current yield levels but by a desire to ensure fundamentals control the market.
