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Treasury doubles long-end buyback limits to support market liquidity
The maximum size for 10 to 30 year nominal security buybacks rises to at least $4 billion per operation from $2 billion, effective Sept. 9 through Nov. 4.
The Treasury Department decided to double the maximum size of its long-end bond buybacks, a move aimed at supporting market liquidity, according to ConnectCRE. The program increases the limit for nominal securities with 10 to 30 years remaining to at least $4 billion per operation, up from $2 billion.
The change takes effect Sept. 9 and remains in place through the Nov. 4 quarterly refunding. Treasury framed the step as liquidity support based on the volume of high-quality securities offered during prior operations, and it did not formally set a yield target.
ConnectCRE said the initial market reaction reflected a squeeze on crowded positions, with the 30-year yield falling to about 5.18% after the announcement. The 30-year yield had reached 5.327% on Aug. 18, its highest level since 2007, and the 10-year yield declined by a similar magnitude.
ConnectCRE added that investors had built curve-steepening trades expecting fiscal concerns to push 30-year yields higher relative to shorter maturities, and the announcement forced traders to unwind those positions, amplifying the rally. The effect faded quickly, with the 30-year yield back above 5.22% the next day as attention returned to debt, inflation and supply, and Treasury Secretary Scott Bessent said the purchases could be increased again.