Treasury Doubles Long-Term Debt Buybacks as Yields Surge
By Tom LoBianco | Quincy News Correspondent
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Washington (Quincy News) — The Treasury Department announced Wednesday it was doubling long-term debt buybacks from $2 billion per operation to at least $4 billion, as long-term yields have recently surged to multi-decade highs.
The announcement sent 30-year and 10-year yields lower as the market reacted to Treasury Secretary Scott Bessent’s latest effort to steady the bond market.
Elevated inflation, uncertainty over the economic impact of the Iran war and the possibility of interest rate hikes from the Federal Reserve have added to upward pressure on long-term Treasury yields. Investors have also focused increasingly on the growing federal deficit and the volume of debt coming to market.
“This increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants, as evidenced by the significant volume of high-quality offers Treasury routinely receives in longer-dated buyback operations,” the Treasury Department said in a press statement Wednesday.
But economists and analysts tracking the latest move from the Treasury cautioned that it looked less like a structural reform which could begin addressing the nation’s still ballooning debt and deficits and more of a short-term measure to take older debt off the secondary market and increase liquidity.
The move comes as investors have grown more concerned about the size of federal deficits, heavy Treasury issuance, persistent inflation and the economic effects of the Iran war.
Shortly after the announcement, the 10-year Treasury yield fell to around 4.65%, while the 30-year yield dropped to around 5.20%. By early afternoon, the 10-year was only slightly below its pre-announcement level.
Beyond the initial market reaction, the move raised the possibility that the Treasury could more broadly deploy a form of “yield curve control,” wrote Mohamed A. El-Erian, chief economic advisor at Allianz and a professor at the Wharton School of the University of Pennsylvania, on X.
But veteran analysts cautioned against characterizing the move as an attempt by the Treasury at quantitative easing.
“It’s just a twist, not money printing,” wrote Doug Kass, president of Seabreeze Partners Management, on X.com.
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