$6 Billion Bond Buyback Falls Flat as Yields Rise
The US Treasury Department made a surprise move on Wednesday by offering to buy back $6 billion worth of its own debt. The plan was supposed to boost investor confidence and lower yields, but it had the opposite effect.
Mark Spindel, chief investment officer at Potomac River Capital, compared the move to the 'bazooka' used by Treasury Secretary Hank Paulson in 2008, saying this is not that. The plan is a buyback, where the Treasury pays cash to lift older bonds off dealers' books, but it doesn't pay down any of the national debt.
Traders were expecting a bigger move, with some predicting $8 billion or even $10 billion in buybacks. But when Scott Bessent, the head of the Public Debt Office, announced the $6 billion plan, yields rose instead of falling. The 10-year Treasury note hit 4.84%, while the 30-year added five basis points to 5.307%.
Bitcoin and gold prices were affected by the move, with Bitcoin dipping towards $78,000 before recovering to $79,084. Gold stayed near $4,407 an ounce. Dan Morehead of Pantera Capital called the plan a bluff that had already backfired, saying governments defending prices against fundamentals always lose.
Stanley Druckenmiller, who once mentored Bessent, also weighed in on the move, saying it's not just about how much money is spent before conceding. He warned that if yields are still climbing after the $6 billion buyback is complete, his words will no longer be an opinion.