Treasury Buys Bonds, Yen, but What It's Really Buying is Time

U.S. Treasury Secretary Scott Bessent has been busy this summer, making unexpected moves to support financial markets. In mid-August, the Treasury announced it would at least double its liquidity-support buybacks for 10-to-30-year bonds, a move that came after 30-year Treasury yields reached their highest level since 2007. This was shortly after the U.S. joined Japan in a rare coordinated intervention to support the yen.

The bond buybacks are not quantitative easing, as they involve purchasing and retiring older, less-liquid securities without reducing the government's overall borrowing requirements. Any cash used must be financed through revenues or additional debt issuance elsewhere. The amounts are modest relative to the $32 trillion Treasury market, but signaling matters.

The currency intervention may be related to the bond buybacks. On July 31, the U.S. Treasury sold euros from its Exchange Stabilization Fund and purchased yen alongside Japan's Ministry of Finance. This marked the first coordinated effort to strengthen the Japanese currency since 1998.