US Treasury Double Down Bond Buyback to $4bn
US Treasury on Wednesday said it will increase the size of its government debt repurchases from $2 billion to $4 billion, sending yields sharply lower amid substantial market stress.
With fixed-income markets under pressure and yields surging to levels not seen in nearly 20 years, the announcement targets the sensitive, longer-duration part of the Treasury market.
The buybacks will be doubled down across the 10yr to 20yr and 20yr to 30yr maturity ranges.
In reaction, the yield on the 30-year Treasury bond fell as much as 0.1 percentage point following the announcement, an unusually sharp move so quickly.
But it barely dents the run-up of recent weeks, according to ING analyst Padhraic Garvey, CFA, who says long-term borrowing costs remain near multidecade highs. The 30-year yield was around 5.2% on Wednesday, up from roughly 4.63% just before the war in Iran.
Treasury said it would put more muscle behind an effort to steady the long-term bond market — a surprise announcement that immediately drove borrowing costs down.
US Treasury will raise the maximum size of each purchase to at least $4 billion, from $2 billion now, focusing on longer-term Treasuries in the 10- to 30-year range — exactly where yields have been under the most pressure.
That brings it in line with the size of buybacks in shorter-maturity buckets. But doing the same in longer maturities has a far larger effect, ING analysts said in a commentary note.
The US Treasury states that it is doing this to provide greater liquidity support, an action analysts acknowledge as an extension of a scheme first introduced in May 2024 to boost liquidity in Treasuries.
It initially had a positive effect, as it improved liquidity. But, gradually, its positive effects have waned, and overall Treasury market liquidity has deteriorated again. In that sense, there is a solid rationale for the Treasury to announce larger buyback sizes over longer tenors, ING said.
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,” the Treasury Department said in a statement. #US Treasury Double Down Bond Buyback to $4bn# Nigeria Eurobonds Face Selloffs, US Treasury Yields Spike
