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- Treasury will at least double the maximum size of liquidity-support buybacks for 10- to 30-year securities.
- Long-term Treasury yields fell sharply after the announcement before edging higher Thursday.
- Strategists say buybacks may temper the rise in yields but do not resolve underlying fiscal and inflation concerns.
The Treasury Department’s latest intervention in bond markets may provide some immediate relief to long-term yields, but analysts see limited scope for the move to halt the upward trajectory of government borrowing costs over the longer term.
Treasury Secretary Scott Bessent’s department announced on Wednesday that it will more than double the size of government debt repurchases to at least $4 billion per operation from Sept. 9, after a week that saw the 30-year Treasury yield hit a 19-year high.
Yields turned sharply lower in response. The benchmark 10-year note closed down over 5 basis points to 4.647% and the 30-year “long” bond tumbled 9 basis points to 5.196%.
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U.S. 30-year performance in 2026 so far.
Fixed income strategists ascribe the recent sell-off in longer-dated debt that began in June to intensified concerns over a budget deficit that appears set to eclipse its 2025 level, persistently above-target inflation, and a rash of corporate debt issuance competing with Treasurys for investors’ favor.
ING wrote in a note on Thursday that Bessent’s intervention “smacks of discomfort” about longer-term borrowing costs, and raises the possibility that the administration could do it “again and again.”
“We’d maintain the view that this move is unlikely on its own to change the trajectory for long-end yields. It does mute it though,” the analysts wrote.
“It reminds the market that the Treasury could double the long tenor buyback sizes again, and again if needed. That’s the real kicker from this move: the anticipation for more should long-dated yields decide to morph higher again in an overly sinister fashion in the days and weeks and months ahead.”
Yields edged back up on Thursday, with the 30-year adding almost 3 basis points at 5.234% — broadly the same level as a week ago.
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Deutsche Bank’s George Saravelos said the unexpected buyback announcement, as well as efforts to bolster the Japanese yen earlier this month, were “signs of increasing administration unease” around the rise in long-end US yields.
Saravelos added that it looks like a “soft-form” financial repression policy to contain yields. Financial repression is a form of government-mandated capital allocation whereby the state borrows from industry to pay off rising debts using tools, such as zero interest rates and inflationary policies, to disadvantage savers.
The Treasury’s intervention came during the same week that the U.S. debt topped $40 trillion.
The tab hit $40.05 trillion as of Tuesday, four and a half years after topping $30 trillion. Years of escalating budget deficits, pushed higher by stimulus funding during the Covid pandemic, have seen the public share of the debt near 100%.
AJ Bell’s head of markets Dan Coatsworth said that while the Treasury has succeeded in bringing down yields on long-term government bonds may in the short term, the U.S. national debt’s “eye-watering level” will be front of mind for investors.
— CNBC’s Jeff Cox also contributed to this report.
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