Treasury Buybacks Bring Fleeting Relief Amid Market Skepticism

U.S. Treasury Secretary Scott Bessent's decision to expand long-dated Treasury buybacks has brought temporary relief, but market participants remain skeptical about its effectiveness in addressing underlying issues.

The move, announced on the 19th, doubled the single-auction buyback size for 10- to 30-year Treasuries to at least $4 billion (approximately NT$130 billion), aiming to improve long-bond liquidity and lower borrowing costs.

However, yields only dipped briefly before resuming their climb, with the 10-year Treasury yield rising to 4.737% on the 21st and the 30-year yield climbing to 5.276%, both approaching multi-decade highs.

Bessent emphasized that the buybacks have 'nothing to do' with any potential Fed rate hikes to combat inflation, but rather aim to signal to markets that current yields do not reflect economic fundamentals.

Market participants are more focused on whether the Treasury's intervention is simply shifting pressure from the bond market to the currency market. JPMorgan analyst Sullivan noted that the Treasury is effectively buying back long-term debt while issuing short-term Treasury bills, a strategy that only temporarily alleviates pressure without changing the underlying debt burden.