The U.S. Treasury said it will buy between $4 billion and $6 billion of long-term government debt in the first operation under its expanded buyback program, a move presented as an effort to curb the recent rise in borrowing costs. The market response was muted. Instead of stabilizing, Treasuries extended their earlier decline after the announcement, suggesting investors had expected a larger intervention. The program’s effectiveness remains uncertain, especially after a similar pattern last month, when yields fell following the initial announcement and then rebounded. Benchmark 10-year Treasury yields climbed last week to their highest level since 2023. Guha, an economist who previously worked at the New York Fed, said the main challenge is whether such interventions can have a lasting effect without broader changes in underlying fundamentals. The report also noted that while the Treasury is not required to buy the full announced amount in each operation, it has usually done so in long-term nominal debt buybacks. Since the program was relaunched in 2024, only two of 52 such operations have come in below the maximum size.
Odaily reported that the U.S. Treasury will purchase between $4 billion and $6 billion of long-term government debt in the first operation under its expanded buyback program, a step that reflects Bessent’s effort to contain the recent rise in borrowing costs.
Treasuries extended earlier losses after the announcement, indicating that the size of the operation fell short of what some investors had expected. How effective the expanded purchase plan will be is still unclear.
Market reaction stayed cautious
After the plan was first announced last month, yields declined and then moved back up. The benchmark 10-year Treasury yield reached its highest level since 2023 last week.
Guha, an economist who previously worked at the New York Fed, said, "The challenge has always been whether the effects of these interventions can last without larger changes in fundamentals."
Treasury may not use the full cap every time
The report said the maximum size set for a buyback operation does not necessarily mean the Treasury will purchase that full amount of bonds. Even so, in buybacks targeting long-term nominal debt, the department has often bought the full size. Since the program was reintroduced in 2024, only two of 52 such operations have not done so. (Jin10)
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