$739B in New Debt Threatens to Absorb Crypto's Liquidity Before Buybacks Reach Bitcoin

The US Treasury is expected to borrow $739 billion from July through September, while also paying investors to hand back some of its older bonds. This pairing may seem self-defeating, but both transactions involve separate ledgers and solve different problems: auctions finance the government and create liquid benchmarks, while buybacks retire selected old issues or help Treasury manage its cash balance.

Treasury's August 3 borrowing estimate assumes a $950 billion cash balance at the end of September, then projects another $628 billion of borrowing from October through December. Its August refunding statement authorized as much as $38 billion of liquidity-support purchases and $25 billion of short-dated cash-management purchases during the current quarter.

Treasury widened its buyback program on August 19, lifting the maximum size of each buyback in the 10-to-20-year and 20-to-30-year sectors from $2 billion to at least $4 billion for operations from September 9 through November 4. The announcement kept the regular auction schedule intact and confirmed that purchased debt will generally be replaced through new issuance, giving the government room to sell and buy bonds during the same financing cycle.