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What is the story about?
The US Treasury plans to buy up to $6 billion of longer-dated government bonds in the first operation under its expanded buyback programme, marking a significant increase from the amount initially indicated to investors.
The Treasury had earlier planned to purchase around $2 billion in the operation, but changed course on August 19, saying the size would be at least doubled. The larger operation comes after Treasury Secretary Scott Bessent indicated that purchases could exceed $4 billion.
Bessent has said the Treasury cannot determine the equilibrium price of Treasuries but can seek to moderate sharp moves in borrowing costs and avoid negative sentiment from taking hold in the world’s largest bond market.
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Treasury yields moved higher following the announcement, with the 10-year US Treasury yield rising 4 basis points to 4.83% in New York. The move suggested the announced buyback size was below some investors’ expectations.
How successful the enlarged program will prove remains to be seen. Yields dropped after the initial announcement of the plan last month, but retraced the move. Benchmark 10-year yields last week hit their highest since 2023.
The maximum size of the buyback operation doesn’t mean the Treasury will necessarily purchase that amount of securities. However, when it comes to buybacks targeting longer-dated nominal debt, the department does tend to buy the full size, having only twice not done so in the 52 such operations since the program was reintroduced in 2024.
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Bessent has described the effort as a "Treasury twist" — a reference to the Fed’s Operation Twists, which were aimed at bringing down longer-term borrowing costs down.
The Treasury had earlier planned to purchase around $2 billion in the operation, but changed course on August 19, saying the size would be at least doubled. The larger operation comes after Treasury Secretary Scott Bessent indicated that purchases could exceed $4 billion.
Bessent has said the Treasury cannot determine the equilibrium price of Treasuries but can seek to moderate sharp moves in borrowing costs and avoid negative sentiment from taking hold in the world’s largest bond market.
ALSO READ | Dow Jones sheds 300 points as oil surge revives inflation, Fed hike bets climb
Treasury yields moved higher following the announcement, with the 10-year US Treasury yield rising 4 basis points to 4.83% in New York. The move suggested the announced buyback size was below some investors’ expectations.
How successful the enlarged program will prove remains to be seen. Yields dropped after the initial announcement of the plan last month, but retraced the move. Benchmark 10-year yields last week hit their highest since 2023.
The maximum size of the buyback operation doesn’t mean the Treasury will necessarily purchase that amount of securities. However, when it comes to buybacks targeting longer-dated nominal debt, the department does tend to buy the full size, having only twice not done so in the 52 such operations since the program was reintroduced in 2024.
ALSO READ | Gold, silver prices: What rising oil and US-Iran tensions mean for precious metals
Bessent has described the effort as a "Treasury twist" — a reference to the Fed’s Operation Twists, which were aimed at bringing down longer-term borrowing costs down.
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