Home›Bonds & Rates›Government Bonds›Treasury buyback plan seen as fueling higher US yields…

Treasury buyback plan seen as fueling higher US yields risk

Rabobank argues that shifting the balance from longer-term issuance to shorter-term funding may not last, given the debt ceiling.

Reported · Written up by our desk · Government Bonds

Rabobank’s senior US strategist Philip Marey said a surprise Treasury Department move to boost buybacks of longer-term bonds only briefly interrupted rising US Treasury yields, with multiple macro factors still pointing upward.

In Marey’s view, elevated inflation, widening budget deficits, and AI-related investment demand remain in place, while unpredictability in Treasury issuance could increase volatility and eventually push investors to demand a higher risk premium for Treasuries.

Marey also warned that the buyback intervention is costly and, for now, the Treasury is funding it by shifting from longer-term debt to shorter-term debt. He said the plan could run out of “ammunition” as the total federal debt remains constrained by the debt ceiling and the Treasury has less flexibility over time.

More like this

Sources