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Treasury raises ceiling for long-term buybacks, dollar slides
The 10-to-20 year and 20-to-30 year buyback cap was lifted to at least $4 billion per operation, effective 9 September through 4 November.
Action Forex reports that the US increased the maximum ceiling for Treasury buybacks in the 10-to-20-year and 20-to-30-year segments, a move widely interpreted as an effort to bring long term rates down. However, the policy largely failed to suppress longer yields and was associated with a weaker dollar.
The outlet says the 30-year Treasury yield climbed from 4.91% at the end of June to 5.31% by 17 August, a surge that market participants believe contributed to the Treasury stepping in. On 19 August, the Treasury raised the per operation ceiling from $2 billion to at least $4 billion for the specified maturity ranges, with the change taking effect 9 September and running through 4 November, the day after the midterms.
Action Forex adds that longer-term yields matter for borrowing across the economy, including long-maturity mortgage rates. It notes that mortgage holders are predominantly in 30-year fixed loans, and it points to the summer rate rise as a factor worsening affordability.
Still, the outlet argues the buybacks did not address the underlying driver of higher long-term yields, the trajectory of US government debt. It cites expectations for the deficit to reach 6.0% this year and rise to 9.1% by 2056, based on CBO projections, and says the market largely rejected a liquidity-only explanation for the intervention.