US Treasury to announce size of long-term bond buyback
The US Department of the Treasury plans to announce on September 9 the size of a buyback of previously issued long-term government bonds. The operation is part of the department’s strategy to contain yields on US Treasury securities and support the proper functioning of the market, CNBC Top News reports.
Buyback parameters
In August, US Treasury Secretary Scott Bessent said that the department would buy back at least $4 billion in previously issued long-term debt. This primarily concerns 10-year and 20-year Treasury bonds. Such a volume is twice the usual size of buyback operations.
Analysts at Wrightson ICAP believe that $4 billion could be the minimum rather than the maximum amount. In their view, a range of $5 billion to $6 billion could become the starting point for discussion, although they do not rule out a larger amount. The analysts described a $6 billion buyback as fairly aggressive, while an increase to three or four times the usual level would be an extreme scenario.
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Bessent’s statements and the market
During a speech at Southern Methodist University, Bessent told currency traders that he was now “the house” and invited those who wished to bet against him. According to CNBC, the secretary was referring to parallel actions by the US Treasury to support the Japanese yen.
The department intervened to buy yen and prevent the Bank of Japan from selling US government bonds. Japan holds $1.1 trillion in US Treasury securities and is the largest foreign holder of US government debt. Selling these securities could raise their yields amid US national debt exceeding $40 trillion and a deficit expected to exceed $2 trillion.
After the buyback announcement, the yield on benchmark 10-year bonds rose by about 10 basis points. The yield on 30-year securities also increased somewhat, but remained below 5.3%. The buyback operation itself is planned for the day after the announcement of its size; the market will watch the offered amount and demand from debt holders.
