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Treasury expands buybacks in long-end maturities to support liquidity
The program would buy up to $4 billion or more in 10-to-20-year and 20-to-30-year Treasuries, funded through higher short-term issuance, as 30-year yields neared their highest levels since 2007.
Treasury Secretary Scott Bessent unveiled what he described as a “Treasury Twist,” aiming to relieve pressure on long-term rates as the 30-year Treasury yield neared its highest level since 2007, ETF Trends reports. The Treasury said it will at least double buyback operations in the 10-to-20-year and 20-to-30-year sectors, purchasing up to $4 billion or more of longer-dated bonds.
According to ETF Trends, the Treasury plans to fund those purchases through increased short-term issuance, with the stated goal of improving liquidity in a “thinly traded long-end market” where yields have risen beyond levels Bessent characterized as justified by economic fundamentals. The 30-year yield fell initially after the August 19 announcement, but ETF Trends notes the rally has been tentative since then, with yields staying below pre-announcement highs.
ETF Trends compares the approach with prior yield-control efforts, noting it is relatively modest versus the Federal Reserve’s Operation Twist and differs from the Bank of Japan’s Yield Curve Control because the buybacks are executed by the Treasury rather than the FOMC. The article also flags limitations, saying the Treasury approach lacks both the scale and the price-setting mechanism that made earlier interventions more effective.
The article adds that CNBC reported Treasury officials see the nearly $1 trillion Treasury General Account as a potential funding source for the expanded buyback program. However, ETF Trends explains that because the TGA is also the government’s primary cash account for day-to-day spending, any meaningful draw would need replenishment through future issuance, potentially shifting supply timing without addressing the underlying pressures from persistent fiscal deficits.