WASHINGTON, Aug 19 (Reuters) - The U.S. Treasury Department said on Wednesday it would double the size of liquidity support buyback operations for longer-dated nominal coupon securities from $2 billion to at least $4 billion per operation.
The change, which will apply to the 10-year to 20-year sector and the 20-year to 30-year sector, will be effective September 9 through November 4, it said in a statement.
The move was announced a day after a major bond selloff pushed the 30-year Treasury yield to
its highest level since 2007 amid worries of an imminent escalation in the U.S.-Israeli war with Iran and rising concerns over a deteriorating U.S. fiscal picture as total public debt outstanding nears the $40 trillion mark.
Yields rose despite a previously scheduled $2 billion buyback operation of 20-year and 30-year bonds on Tuesday.
The 30-year yields had subsided somewhat on Wednesday from Tuesday's 19-year high of 5.34%, and the Treasury's announcement drove them down further, to as low as 5.187%, marking the largest daily drop in yields since late June.
"This increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants, as evidenced by the significant volume of high-quality offers Treasury routinely receives in longer-dated buyback operations," the Treasury said in a statement.
The Treasury has for several years engaged in scheduled purchases of older-vintage securities prior to their maturity dates to provide liquidity support for those so-called off-the-run bills, notes and bonds.
Tuesday's buyback of 20- to 30-year bonds included purchases of $1 billion of a bond maturing in 2048 and another $1 billion of two bonds maturing in 2051, Treasury records show. Investors had offered nearly $20 billion of bonds to Treasury to repurchase.
The next currently scheduled buyback operation for 20- and 30-year bonds is set for September 24, with a 10- to 20-year buyback scheduled on September 10.
The Treasury said it would publish an updated tentative buyback schedule at a later date.
(Reporting by Daphne Psaledakis, David Lawder and Dan Burns; editing by Susan Heavey and Paul Simao)
