▲ U.S. Treasury Secretary Scott Bessent
The U.S. Treasury announced on the 9th local time that it will increase the scale of its long-term Treasury buybacks to up to $6.0 billion.
Although this is a threefold expansion compared to previous levels, Treasury yields actually rose as it failed to meet heightened market expectations.
On this day, the U.S. Treasury announced that it would purchase up to $6.0 billion in 10- to 20-year Treasury bonds through a buyback scheduled for the 10th.
This is three times the limit of the previous long-term Treasury buyback ($2.0 billion).
The actual purchase will take place for 20 minutes starting at 2:00 PM on the 10th.
Previously, Treasury Secretary Bessent stated that he would expand the scale of buybacks to support market liquidity and stabilize interest rates after 30-year U.S. Treasury yields surged to their highest levels since 2007.
According to the Securities Industry and Financial Markets Association (SIFMA), the scale of outstanding government bonds reaches approximately $30 trillion, with over $1 trillion traded daily in the market.
On August 21st, Secretary Bessent raised market expectations by stating, "We have many policy tools," and that purchases exceeding $4.0 billion per operation would be possible.
Controversy over the appropriateness of the Treasury's market intervention has persisted, but Secretary Bessent emphasized its legitimacy the previous day, stating, "My role is to push the market back to a state of equilibrium."
However, the market response was lukewarm.
As selling continued amid disappointment that the buyback scale fell short of expectations, U.S. Treasury yields rose.
As of 3:00 PM Eastern Time, the yield on the 10-year U.S. Treasury note rose 3.1 basis points (1 bp = 0.01 percentage points) to 4.836%.
This is the highest level since October 31, 2023.
At the same time, the 30-year Treasury yield rose 2.1 bps to 5.285%, and the 2-year Treasury yield also rose 3.0 bps to 4.425%.
The 30-year yield marked its highest point since August 17, while the 2-year yield reached its highest level since July 25, 2024.
Since bond yields and bond prices move inversely, an increase in Treasury yields means a drop in prices.
In some corners of Wall Street, the possibility of the Treasury undertaking a bolder purchase reaching $7.0 billion to $8.0 billion, or even $10.0 billion, had been discussed.
Wells Fargo analyzed the rise in Treasury yields, saying, "It shows that some market participants were expecting a larger-scale operation."
Deutsche Bank strategist Steven Jen pointed out, "Although the Treasury tripled the amount, it fell short of the 'shock' investors had anticipated, leading the market to express disappointment," adding, "It seems the Treasury has created a monster that it must constantly feed."
(Photo: Getty Images)
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