Treasury Secretary Scott Bessent launched an expanded bond buyback program on September 9, 2026, targeting 10-year to 20-year securities, a move intended to cool rising bond yields which recently reached a 19-year high. This marks the first operation since the Treasury announced on August 19 its plan to at least double the buyback sizes from $2 billion to a minimum of $4 billion. Bessent framed this as a measure to restore equilibrium to the bond market, stating, "My job is to try to push things back towards equilibrium." Wall Street is closely watching the announcement today, September 9, regarding the exact size of the operation.
The Treasury's strategy, dubbed a "Treasury Twist," involves purchasing long-dated bonds to depress long-term yields while selling shorter-term debt. This approach has drawn skepticism from some market participants about its long-term effectiveness, especially as the 30-year Treasury yield, after a temporary dip, began climbing back towards 5.27%. Bessent attributes the high yields to transient factors like the Iran conflict and market liquidity issues, and has hinted at future fiscal consolidation measures.
Funding for these buybacks remains a key point of discussion. While most analysts initially assumed funding would come from selling short-term bills, sources indicate the Treasury could utilize its near $1 trillion General Account (TGA) to bolster its firepower. Bessent has actively built up the TGA to approximately $950 billion, significantly above the Biden administration's stated goal of $550 billion to $600 billion. Using the TGA would provide substantial resources and potentially address market doubts about the Treasury's ability to sustainably influence yields, without involving the Federal Reserve directly.
Bessent's proactive stance puts him at odds with Federal Reserve Chair Kevin Warsh, who favors greater market-led price discovery. With inflation at 3.7%, above the Fed’s 2% target, Warsh is wary of actions that might be seen as accommodating fiscal interventions aimed at lowering borrowing costs. The success of Bessent's program and the credibility of his hinted fiscal consolidation will be crucial in determining whether he can sustainably influence long-term yields.
