The U.S. Treasury Department will at least double its purchases of long-term bonds
The U.S. Department of the Treasury will at least double the maximum volume of government bond buybacks—from $2 billion to at least $4 billion. The decision will apply to bonds with maturities ranging from 10 to 20 years and from 20 to 30 years, according to CNBC.
The new policy will take effect on September 9 and remain in place until November 4. The department stated that the increase in buyback volumes is intended to provide additional liquidity support to the long-term nominal bond segments, where market participants regularly submit a significant volume of high-quality bids.
Following the announcement, U.S. Treasury yields fell, while futures on U.S. stock indices rose. The yield on benchmark 10-year bonds fell by 6 basis points to 4.647%, while the yield on 30-year bonds dropped by 9 basis points to 5.196%. One basis point equals 0.01 percentage point; bond prices and their yields move in opposite directions.
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According to CNBC, the long-term segment of the U.S. Treasury market has been under pressure, and a shortage of buyers has been observed there since late June. The buyback means that the Treasury Department will become a larger buyer of previously issued long-term debt securities, providing liquidity in this segment.
Krishna Guha, head of global central bank policy and strategy at Evercore ISI, believes that more active buybacks could attract buyers lured by the previous rise in yields and trigger the closing of short positions. At the same time, he noted that these operations do not alter the fundamental need to finance large government deficits and a significant volume of corporate debt related to artificial intelligence.
Economist Mohamed El-Erian described the planned purchases as modest both in absolute terms and relative to the net volume of new borrowing. In his view, they are more indicative of a broader application of yield curve control. Peter Bukvar, Chief Investment Officer at One Point BFG Wealth Partners, emphasized that the transactions do not constitute debt repayment but rather alter the maturity structure of U.S. Treasury bonds.
