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Treasuries outperform swaps as long-end buyback plan gains traction
The 30-year spread between Treasuries and equivalent-maturity swaps narrowed to the smallest level since February after the plan was announced.
LiveMint Markets reports that Treasury Secretary Scott Bessent’s plan to expand buybacks of longer-dated bonds has coincided with stronger performance in US Treasuries versus interest-rate swaps. Since Bessent’s announcement last week, Treasuries have outperformed equivalent-maturity swaps, narrowing the 30-year spread to the smallest since February.
Benchmark US yields also drifted lower after early volatility around the government’s intention to at least double its buybacks of longer-dated bonds. LiveMint Markets cites Citi rates strategy head Jason Williams, who said the new Treasury “put” improves the asymmetry for investors holding the long end by providing a potential backstop.
The report also points to additional drivers for the move, including yen intervention and a Monday report from CNBC that the Treasury Department could use the Treasury General Account, the department’s cash parked at the Federal Reserve, to fund increased purchases of long-dated bonds.
In derivatives markets, LiveMint Markets says options positioning has turned more bullish for long-maturity Treasuries, with US bond futures calls running up relative to puts over the past week. By contrast, skew measures for shorter-maturity futures have stayed near neutral levels, reflecting traders’ focus on the long end of the curve.