Treasury Secretary Scott Bessent said on Aug. 20 that the government debt buyback operation could be larger than the recently announced $4 billion.
The department revealed a day earlier that it will double its planned $2 billion in buybacks of long-dated Treasury securities beginning next month.
Washington plans to “make a market” for long-run Treasury securities as liquidity conditions for the 30-year bond are “very poor,” Bessent said.
“We’re going to increase the size of the buyback,” he told CNBC in a live interview. “I would note that it could be more than the 4 billion [dollars] per issue.”
While he stopped short of providing a number, the senior administration official said the figure will depend on market conditions and that the Treasury has a “big toolkit.”
“We’ll see what the conditions are, and you know we will analyze them,” Bessent stated. “All we’re trying to do is get people to focus on the fundamentals and not trade the headlines during a quiet period in a thin market.”
U.S. government bond yields have rocketed this month.
The 30-year yield rose to 5.31 percent this week, its highest level since June 2007. The benchmark 10-year yield also edged up to a 14-month high of 4.77 percent.
The 2-year yield, which generally tracks Federal Reserve policy expectations, was little changed at around 4.19 percent.
The Treasury’s debt buyback expansion sent Treasury yields sharply lower midweek, but yields reaccelerated during Thursday’s trading session.
By repurchasing long-dated debt at a time of tepid demand, the Treasury can ease pressure on long-term yields.
A number of factors have led global investors to dump long-term bonds—both in the United States and abroad—ranging from intensifying fiscal fears to persistent inflation worries. This environment could pose greater risks for the U.S. bond market, especially as the Treasury accelerated its debt issuance.
The higher move in yields might also be a normalization rather than a crisis, says Lawrence Gillum, chief fixed income strategist at LPL Financial.
“The backup in long-end government yields is real, but we think this is a necessary normalization, not a crisis,” Gillum said in a note emailed to The Epoch Times.
“And the fact that the same repricing is underway in [Japanese government bonds], Bunds, [French government bonds], and gilts tells us this is a global term premium story, not a verdict on U.S. creditworthiness.”
But if the objective is to soothe bond markets, the Treasury’s action merely buys time rather than offers a permanent solution, UBS strategists said in an Aug. 19 note.
“The Treasury’s buybacks may discourage aggressive curve-steepening trades and reduce near-term market stress, but they do not address the forces supporting higher term premia, including persistent deficits, elevated capital demand, and a shift in Treasury ownership toward more price-sensitive private investors,” they said.
This move comes weeks after the White House coordinated a foreign-exchange intervention to support the Japanese yen—the first since the joint buying operation that occurred during the Asian Financial Crisis in 1998—after it had collapsed to a 40-year low.
‘Misinformation’
On the fiscal front, Bessent dismissed concerns surrounding the debt and deficit.
The national debt crossed the $40 trillion milestone for the first time, and the federal government could reach $50 trillion as early as 2029.
“Forty trillion dollars should be a number that stops everyone in Washington in their tracks,” Les Rubin, founder and president of Main Street Economics, said in a statement.
“Instead, it is becoming just another number. We have reached the point where trillion-dollar increases in the national debt barely generate a reaction. That is fiscal denial, not fiscal policy.”
But Bessent believes there is “nothing magic” about this number, adding that there is a lot of “misinformation” surrounding the government’s fiscal position.
Revenues have taken a hit due to reduced tariff income and the immediate expensing of factories, equipment, and farm structures.
“We can grow our way out of that,” Bessent said.
“We have a lot of potential energy that will turn into kinetic energy during next year as these factories come online.”
The federal deficit is poised to reach $2 trillion by the end of fiscal year 2026, but this could be the administration’s peak, he told the business news network.
