Bessent Signals Larger Bond Buybacks Amid Elevated Yields

Treasury Secretary Scott Bessent has signaled that the government's bond buyback program could grow even larger, with repurchase amounts potentially exceeding $4 billion per issue. This is in response to long-term yields hovering near their highest levels in nearly two decades. The Treasury announced it would double the size of its liquidity support buyback operations for longer-dated nominal coupon securities from $2 billion to at least $4 billion per operation.

Bessent framed the intervention as a signal to investors that current yields do not match the economy's underlying fundamentals. He stated, 'We want to show that yields do not reflect underlying fundamentals.' The Treasury's move on Wednesday initially brought some relief to a bond market that had been selling off for weeks, with 30-year yields falling almost 10 basis points to around 5.187%. However, the gains proved short-lived, and by Thursday morning, the 30-year yield was back around 5.25%, essentially unchanged from where it stood before the Treasury stepped in.

The Treasury's intervention has exposed a growing tension with the Federal Reserve under Chairman Kevin Warsh, who has tried to unwind years of explicit central bank guidance and give markets more room to respond independently to economic data. Krishna Guha, vice chairman at Evercore ISI, noted that the two policy approaches are increasingly at odds.