Treasury Doubles Debt Buybacks in Bid to Steady Market

The US Treasury Department has announced that it will double the size of its debt buybacks to provide greater liquidity support in the longer-dated nominal sectors. The move, led by Secretary Scott Bessent, targets the sensitive 10- to 20-year and 20- to 30-year portion of the market, which has seen a buyers' strike since late June.

The Treasury will increase the maximum size of its buyback operations from $2 billion to at least $4 billion. The change will start on September 9 and stay in effect through November 4. This means that the Treasury will be a larger buyer of older, longer-duration debt, providing liquidity to a part of the market that historically has shown strong demand.

Economists have expressed mixed views on the move. Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said that the operation can help crowd in potential buyers and force some near-term short-covering, while discouraging investors from going max short in the future. However, RSM's chief economist Joe Brusuelas warned that the attempt to keep yields in check could end up making the Federal Reserve's job of getting inflation back to 2% more difficult.