Treasury Debt Buyback Plan Criticized as 'Kicking the Can Down the Road'

A top JPMorgan analyst has expressed concerns that the US Treasury's accelerated buybacks of debt are merely kicking the issue down the road. James Sullivan, co-head of global fundamental research at JPMorgan, compared the move to paying a mortgage with credit card, saying it can work for a while but eventually leads to financial difficulties.

The government has been struggling to find buyers for its ever-growing debt, which now stands at $40 trillion. The Treasury's buyback program will target the 10-to-20 year and 20-to-30 year portion of the market, where yields have been climbing.

Treasury Secretary Scott Bessent acknowledged pressure on longer-dated yields but claimed their levels don't reflect current economic conditions. However, Sullivan disagreed, saying that the buybacks only mask the underlying problem and won't address the increased difficulty in finding buyers for US government debt.

The issue is compounded by China's holding of Treasuries being at an 18-year low. The accelerated buyback program may not be enough to meet demand, with Bessent stating that it could be higher than the initially announced $4 billion per issue.