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US Treasury faces backlash over $4 billion long-term bond purchases
Critics argue the buybacks amount to “price management” and do not address the growing supply of government and corporate debt that investors must absorb.
The US Treasury’s decision to increase purchases of long-term bonds to $4 billion has drawn criticism from banking experts and prominent investors after the move followed a brief spike in the US 30-year yield to a nearly 20-year high, according to LiveMint Markets. Billionaire investor Stanley Druckenmiller, whose comments were published via an opinion piece in the Wall Street Journal, said markets were right to interpret the announcement as price management and called it a mistake, arguing that intervening in bond pricing could lead to even larger buybacks and damage the Treasury market’s credibility. Druckenmiller also said the Treasury’s borrowing and debt management should not appear to follow the political calendar, warning that credibility is an asset that takes a long time to accumulate. He further argued that while the approach could help in the short term, it cannot “buy your way” out of a broader solvency discussion using liquidity tools. JPMorgan’s James Sullivan, in comments cited by LiveMint Markets, said the buybacks also fail to resolve the larger problem of rising government and corporate debt supply that still needs to be absorbed by investors, potentially pushing issuers to offer higher yields as supply and demand are balanced through price.