Treasury Will Keep Debt Auctions, Expand Long-Bond Buybacks

Treasury Secretary Scott Bessent told reporters at a press conference on new sanctions against Iran that the department will proceed with its previously announced auction schedule, including sales of longer-dated notes, while enlarging buybacks of 10- to 30-year securities.

The expanded buyback programme doubles the size of the Treasury’s quarterly purchases of longer-maturity debt. The first larger operations, covering 10- and 20-year notes, are scheduled to begin on Sept. 10. The Treasury has not yet purchased securities under the enlarged plan.

Under the programme, the Treasury plans buybacks of 10- to 30-year securities worth at least $4 billion per operation during the coming quarter. Treasury officials describe the purchases as a tool to support liquidity in the long end of the government bond market rather than to add supply in that segment.

The department has not disclosed how it will fund the larger purchases. One option is to use cash in the Treasury General Account at the Federal Reserve. The TGA held about $940 billion as of last Wednesday, compared with an average of roughly $840 billion over the past year. Part of the elevated balance reflects about $166 billion in refunds owed to importers after a Supreme Court ruling that invalidated a portion of prior tariffs.

Using existing cash would allow the Treasury to carry out buybacks without issuing additional short-term debt, while reducing the government’s liquid reserves. If the department replaces any cash used by borrowing, officials say new issuance would likely be concentrated in shorter maturities to avoid increasing supply at the long end.

Long-term Treasury yields rose to their highest levels in almost two decades before the buyback announcement. The initial notice pushed yields down across the 10-, 20- and 30-year sectors, though much of that decline was later reversed; long-term yields were slightly lower again on Monday. Market participants point to added pressure on the long end from heavy corporate bond issuance, including debt raised to finance artificial-intelligence projects.

Bessent, who previously worked in hedge funds and has experience in sovereign debt and foreign exchange, has taken a more active market role since joining the Treasury. Earlier this month he participated in a joint US-Japan intervention in the yen market. The federal government’s outstanding debt recently surpassed $40 trillion, a figure that keeps attention on borrowing costs and Treasury market liquidity.