The U.S. Treasury bought $5.187 billion of 10- to 20-year bonds in a Thursday buyback operation, falling short of the previously announced $6 billion maximum and landing below investor expectations. The result added to selling pressure and pushed the 10-year Treasury yield to its highest level since 2023. Investors had submitted $10.5 billion in offers to sell bonds back to the Treasury during the operation. While the department was under no obligation to purchase the full amount, the move stood out because it was only the third time the Treasury declined to fill the cap in 53 long-bond buybacks since the program was reintroduced in 2024. TD Securities strategist Molly Brooks said the outcome showed the Treasury had been more selective than usual. She said that if the Treasury wants to meet market expectations and complete the full buyback amount to help lower long-end rates, it may need to accept less attractive pricing in future operations. Brooks added that the prior assumption that the Treasury would buy 100% of the maximum amount had now been broken, which could help reset market expectations.
In the first expanded Treasury buyback operation under U.S. Treasury Secretary Bessent, the U.S. Treasury purchased fewer long-dated government bonds than investors had expected, adding to a selloff and lifting long-end yields.
On Thursday, the Treasury bought back $5.187 billion of 10- to 20-year Treasuries, below the previously announced maximum buyback size of $6 billion. After the operation, the 10-year Treasury yield rose to its highest level since 2023.
Investors submitted a total of $10.5 billion in offers to sell bonds to the Treasury in the operation. The Treasury was not required to buy up to the maximum amount, but since the program was reintroduced in 2024, this was only the third time in 53 long-bond buybacks that it chose not to fill the cap.
TD Securities strategist Molly Brooks said: “This suggests the Treasury was more selective than usual. If the Treasury wants to meet market expectations and complete the full buyback amount to push down long-end rates, it may need to accept less attractive offers in future buyback operations. At a minimum, the prior precedent that the Treasury would buy back 100% of the maximum amount has now been broken, which may help re-disperse market expectations.”
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