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Treasury buybacks revive concerns over long-end pressure and dollar impact
The Treasury said it would at least double the cap on certain long-dated bond buybacks to $4 billion, a move some investors interpret as efforts to restrain yields rather than letting rates clear higher.
The U.S. Treasury’s decision to expand purchases of older long-dated bonds has renewed foreign-exchange worries that any attempt to prevent borrowing costs from rising could ultimately shift the adjustment onto the dollar, according to Reuters citing Treasury statements and commentary.
The Treasury said it would at least double the maximum size of certain buyback operations to at least $4 billion, targeting long-term securities that have drawn heavy selling since late June. Treasury Secretary Scott Bessent told CNBC that the buyback could be more than $4 billion and that markets “got a little bit ahead of itself” with the recent selloff.
Investors have focused on the timing, with the announcement coming outside the normal quarterly refunding calendar and ahead of a 20-year auction, after long-end yields climbed amid a deteriorating fiscal outlook, heavy issuance, geopolitical risk, and uncertainty about the Fed’s policy path. Reuters noted that the 30-year yield reached its highest level since 2007 this week, ahead of total public debt topping $40 trillion.
Some market participants see the actions as a way to keep yields from reaching market-clearing levels through buybacks or related measures, even if the underlying adjustment does not disappear. Reuters said Scotiabank’s Shaun Osborne described a “price to pay” in the form of higher yields or a concession from the U.S. dollar, and it reported that gold rose more than 3% and bitcoin was up 13% after the Treasury’s surprise.
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