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Treasury bond buyback disappoints as long yields rise
The Treasury doubled long-end buybacks to at least $4 billion per operation, but investors said the boost is likely to be short-lived given inflation, deficit worries, and monetary policy uncertainty.
The U.S. Treasury’s surprise bond buyback strategy failed to fully ease market concerns as long-bond yields rose on Thursday, pushing the dollar higher. Reuters reported that the move came after long-end yields hit the highest level since 2007 and was meant to provide immediate relief following a sharp selloff in long-duration debt.
According to Reuters, the Treasury responded on Wednesday by doubling long-end buybacks to at least $4 billion per operation, after market participants had focused on inflation, expanding government debt, and competition for capital tied to large AI-related borrowing. Investors, however, said they wanted steps that could offer more durable support and expressed concern about potential market distortions.
Reuters also said Treasury Secretary Scott Bessent indicated he may increase repurchase volumes again, framing the objective as supporting liquidity in a segment of the market that is thinly traded, especially in August, while facing heavy corporate issuance at higher yields. Wells Fargo Investment Institute co-head Luis Alvarado said the action should provide only short-term relief because the main drivers of higher yields, including inflation and policy uncertainty, remain in place.
The Reuters piece noted that elevated borrowing costs are contributing to higher mortgage rates, and investors raised questions about whether the Federal Reserve or the Treasury is now the bigger influence on broader credit conditions. Principal Asset Management’s Michael Goosay said intervention typically does not work well long term, and that broad borrowing needs limit the impact on long-bond yields.