Treasury Secretary Scott Bessent is exploring the use of the Treasury's cash holdings, known as the General Account, to fund an expansion of debt buyback operations, according to reports. This initiative aims to address high borrowing costs and improve liquidity in the bond market. The General Account currently holds around $680 billion.
The consideration of using the cash pile comes as the Treasury has already increased its planned debt buybacks. On August 19, the Treasury Department announced it would at least double its buyback operations for longer-dated securities, from $2 billion to "at least" $4 billion per issue. This move was intended to target the sensitive 10- to 30-year sector of the market, which has experienced significant stress and weak liquidity, particularly for the 30-year bond.
Bessent confirmed on August 20 that these buybacks could exceed $4 billion per issue, emphasizing the Treasury's intent to "make a market" in longer-dated securities. He noted that current yields do not reflect market fundamentals and that the Treasury has a "big toolkit" to address market conditions. The Secretary also indicated that a new fiscal initiative focusing on consolidation would be unveiled soon, as the national debt recently surpassed $40 trillion.
Analyst reactions to the buyback program have been mixed. While some view it as a necessary intervention to support liquidity, others, like economist Mohamed El-Erian, suggest the planned purchases are "small in both absolute terms and relative to net issuance," characterizing it as a form of "yield curve control." Critics also argue that such interventions could complicate the Federal Reserve's efforts to control inflation and may be politically motivated ahead of upcoming elections.
