Treasury Secretary Scott Bessent announced a significant increase in the size of long-dated debt buybacks, more than tripling them to $6 billion, effective from September 9, 2026. This move is part of an expanded program designed to restrain US bond yields and improve liquidity in the market, particularly for 30-year bonds, which Bessent described as having "very low" liquidity. The decision has put some Wall Street dealers on edge as they anticipate the implications of this aggressive intervention.
This latest announcement follows a prior doubling of the buyback cap from $2 billion to $4 billion in August. The Treasury Department's increased intervention comes amidst a sharp sell-off in Treasuries, which saw the 30-year yield hit 5.337% on August 19, its highest level since 2007. While yields briefly fell after the initial buyback announcement, they have since resumed climbing, with 30-year bonds most recently around 5.235% and 10-year bonds at about 4.704%.
Bessent stated that the buyback's primary goal is not directly about targeting a specific yield level but rather to ensure bond prices better reflect economic fundamentals and to quell a "fever" in the bond market. Analysts had anticipated a substantial increase, with estimates ranging from $5-$6 billion by Wrightson ICAP to as high as $10 billion by Morgan Stanley for upcoming operations. The scale of these buybacks is seen as a critical market signal, potentially reducing net long-term bond supply significantly and impacting other assets, such as gold and Bitcoin, by improving liquidity and lowering yields.
The ongoing pressure on US government debt yields is attributed to factors including high government debt and deficit levels, a rising term premium, higher rates abroad, and competition from corporate bond issuance linked to AI investments. With the US national debt surpassing $40 trillion, Bessent emphasized that the country can "grow our way out of this" and plans to discuss "fiscal consolidation" with the Office of Management and Budget Director.
