The US government's recent debt buyback operation, led by Treasury Secretary Scott Bessent, disappointed investors by purchasing less longer-dated debt than anticipated. The Treasury Department bought $5.19 billion of debt maturing in 10 to 20 years, falling short of the previously announced maximum of $6 billion. This undershot the market's expectations, leading to an intensified selloff in bonds and pushing borrowing costs higher.
Following the operation, benchmark 10-year Treasury yields extended their rise to 4.95%, reaching their highest level since 2023. The market had expected a more substantial intervention, with some participants hoping for buybacks of $10 billion or more, a figure suggested by Bessent's earlier comments last month when he outlined a $4 billion minimum for improving liquidity in long-dated debt. The increase in the maximum buyback to $6 billion from a previous $2 billion was still deemed insufficient by many.
Analysts noted that the disappointment over the buyback's size, coupled with other factors like Brent crude climbing above $100 a barrel, contributed to the surge in yields. Some financial figures criticized the buyback plan as a short-term fix, arguing that the Treasury market, with its approximately $32 trillion in publicly traded securities, is too large for buybacks of this scale to have a significant effect. The market's reaction suggests that Bessent's efforts to manage interest rates may be adding to upward pressure on them, contrary to the intended effect.
