The United States Treasury Department on Wednesday said it will buy back up to US$6 billion of government debt in an operation aimed at keeping bond markets functioning.
The much-anticipated announcement triples the normal buyback operation and follows a 19 August statement from Treasury Secretary Scott Bessent that the department would at least double the normal amount for already-issued securities.
Treasury also said future operations will be at least $4 billion.
The move will target 10- and 20-year Treasury notes, a less liquid part of the market where yields have reached multi-year highs.
Although the operation is ostensibly aimed at maintaining liquidity in government debt markets, the measure has also been viewed as an attempt to limit Treasury yields, which had climbed to levels not seen since before the global financial crisis in 2008.
The market reaction, however, was negative. Treasury yields rose further, although they remained volatile, with long-dated securities increasing as much as 5 basis points each before easing.
There had been speculation ahead of Wednesday's announcement that the buyback level could be several times higher than the initial amount, after Treasury said the operation would be “at least” double the normal $2 billion level.
“At the end of the day, the Treasury is issuing a spectacular amount of securities, and they’re trying to control the price level at the back end of the curve with really what, in the big scheme of things, is not necessarily a major operation,” Robert Tipp, chief investment strategist and head of global bonds at PGIM Credit was quoted as saying in a CNBC story.
“When they came out and said we would be buying at least 4 billion, I think market expectations were kind of thinking six to 10, and they’ve come in at the bottom end of the market’s expectations,” he added.
“As a result, you’re seeing a negative reaction here in the market with the sell-off at the back end of the curve.”
The actual buybacks will take place on Thursday in a 20-minute operation that will conclude at 2 pm ET.
Higher Treasury yields have come amid a combination of factors, including surging government debt that recently passed $40 trillion, elevated inflation fears linked to tariffs and the Iran war, and a resurgence in energy prices that saw crude oil top $100 a barrel on Wednesday.
At the same time, the long end of the Treasury curve is the less active part of a market considered the deepest and most liquid in the world.
Treasury issuance this year has jumped 11.8% from 2025, while the $31.8 trillion in publicly held debt is up 8.2%.
Treasury's manoeuvring, which has also included a parallel move to support the Japanese yen, comes as Federal Reserve Chairman Kevin Warsh has advocated less involvement in financial markets.
