Treasury Buybacks May Fuel Dollar Debasement Trade

The US Treasury is set to announce an expanded long-dated Treasury buyback operation on Wednesday. In August, it committed to at least doubling the maximum amount it can purchase in a single operation, from $2 billion to a minimum of $4 billion.

This would increase the annualised capacity for these operations from $72 billion to $144 billion, which is approximately 15.6% of current annual gross 10-to-30-year issuance.

The initial announcement in August sparked a sharp decline in the US dollar and fuelled gains in gold and Bitcoin. If Treasury were to announce a significantly larger buyback size, it could reignite the dollar-debasement trade and lead to further price movements in these markets.