US Treasury Secretary Bessent said Monday that the Treasury will conduct its next bond buyback on Sept. 9, while signaling that additional operations are still on the table.
Bessent said the next buyback will take place on Sept. 9 and added, 「let’s see what happens」. He also said the Treasury would continue its regular auction schedule, adding that 「you’ll hear from us again at the beginning of next quarter」.
His remarks came as markets focus on whether the Treasury will step up support for the long-dated US government bond market.
Sept. 9 marks the start of the previously announced expansion
The Sept. 9 date cited by Bessent was not a surprise launch of a new buyback program on Monday. It is the effective date of the Treasury’s previously announced expansion of long-dated Treasury buybacks.
On Aug. 19, the US Treasury said it would at least double the size of liquidity support buybacks for nominal Treasuries in the 10- to 20-year and 20- to 30-year sectors. The cap for each operation was raised from $2 billion to at least $4 billion.
The Treasury said at the time that the change will take effect on Sept. 9 and remain in place until the end of the current quarterly refunding period on Nov. 4.
In explaining the move, the Treasury said it had continued to receive a large volume of high-quality offers in longer-maturity buyback operations, showing strong participation from market participants and supporting the case for more liquidity support in the long-end nominal Treasury market.
A day after that announcement, Bessent left room for a larger scale. He said last Thursday that the Treasury’s long-bond buybacks could exceed $4 billion per operation. He described the sector as 「a thinly traded part of the market」 and said the Treasury has 「a full toolbox」 in the US government bond market.
Bessent also said the market was not paying enough attention to the fundamentals of the US economy and that Treasury yields were not reflecting those fundamentals. He singled out 30-year Treasuries, saying liquidity there was 「particularly scarce」. Asked how large the buybacks could become, he said it would 「depend on conditions」 and added that 「any fluctuations within 24 hours are just noise」, while describing the Treasury as 「trying to restore balance to a weak market」.
That leaves Sept. 9 as the formal start of the previously announced increase, while Bessent’s earlier comments on the possibility of going above $4 billion keep open the option that actual operation sizes may rise beyond the minimum level already published.
TGA emerges as a possible funding source
Earlier on Monday, CNBC reported, citing two senior Treasury officials, that the department is considering using funds from the Treasury General Account, or TGA, which is close to $950 billion, to help finance the recently expanded buyback plan.
According to the report, the TGA is being viewed as a potential source of funds for purchases of some off-the-run Treasuries, though officials did not specify how much might be used or when that funding might begin.
The report drew attention because the main market assumption had been that the Treasury would fund long-bond repurchases by issuing more short-term Treasury bills.
If the Treasury takes that route, it would increase short-dated supply while reducing long-dated supply, creating an effect on the maturity profile of government debt similar to a Treasury version of Operation Twist. The market had previously discussed parallels between this kind of Treasury action and the Federal Reserve’s historical twist operations.
If, instead, the Treasury uses TGA cash directly, it would not need to rely entirely on fresh short-term bill issuance to raise funds for the buybacks.
Still, a TGA balance close to $1 trillion does not mean the Treasury plans to spend nearly $1 trillion buying Treasuries. The reports only indicate that the account is being considered as a possible source of funds. The Treasury has not published any final amount.
More importantly, the TGA is the Treasury’s main operating account at the Federal Reserve and is used for the government’s day-to-day receipts and payments. The amount that can actually be directed to buybacks remains constrained by government spending, debt issuance plans and cash balance management targets.
For the market, the key question is not the headline size of the TGA itself, but whether the Treasury will use that cash, how much it will use and at what pace it would carry out long-dated Treasury buybacks.
Buyback boost faded after one day
The immediate backdrop for the larger long-bond buybacks is that yields on long-dated US Treasuries had remained elevated.
After the Aug. 19 announcement, Treasury yields briefly moved lower, with markets treating the step as an important policy signal that the department was trying to ease funding pressure at the long end.
That effect did not last. On Thursday and Friday of last week, prices of intermediate- and long-term US Treasuries fell for two straight sessions, meaning the support from the expanded buyback announcement lasted only one day.
Market attention then shifted back to the US fiscal deficit, long-term debt supply and inflation pressure.
Media reports last week said investors viewed the Treasury’s new measures as potentially able to only briefly slow the rise in borrowing costs, and the market move showed doubts about how effective the plan would be. Howard Du, a TD Securities strategist in New York, said the market was 「not fully buying into」 the idea that Bessent could truly push long-end yields lower.
That sets up Sept. 9 as the point when the market’s focus moves from whether the Treasury will act to whether the action can materially change supply and demand in the long-dated Treasury market.
Under the Treasury’s published plan, the cap on each buyback in the 10- to 20-year and 20- to 30-year sectors will rise to at least $4 billion starting Sept. 9. The Treasury also said earlier that it will provide more information on future buyback sizes at the next quarterly refunding meeting on Nov. 4.
Sept. 9 is now a key date for testing the real impact of the expanded buyback plan, while Monday’s report about the TGA has prompted investors to reassess the scale of the Treasury’s available tools.
Even so, whether the Treasury funds the operations with TGA cash or by issuing short-term bills, the move is not the same as Federal Reserve quantitative easing. What the Treasury can change is the maturity structure of debt and marginal demand for specific bonds. It does not remove the broader US fiscal deficit, total debt load or future financing needs.
For long-dated Treasuries, the level of yields will still be shaped by the US fiscal position, inflation, economic growth and investor judgments about future Treasury supply.