U.S. Treasury Triples Long-Dated Bond Buyback to $6 Billion

The US Treasury will purchase up to $6 billion of longer-dated government debt in its latest buyback operation, tripling the size of the previous planned operation as Treasury yields remain elevated.

The US Treasury plans to buy up to $6 billion of longer-dated government bonds as rising yields put pressure on borrowing costs.

The Treasury said it will buy 10- to 20-year Treasury securities in the operation scheduled for Thursday.

The move follows the department's commitment last month to at least double its longer-dated buybacks to $4 billion over the next quarter.

Treasury Secretary Scott Bessent has argued that the buybacks can improve liquidity in older Treasury securities and help the functioning of the world's largest government bond market.

The purchases are not designed to dictate the market's equilibrium price, but rather to help reduce market frictions and manage liquidity.

The size of the operation exceeded the original $2 billion figure that had been communicated to investors. However, the market reaction suggested that some investors had anticipated an even larger intervention.

The benchmark 10-year Treasury yield rose to around 4.85% following the announcement. It reached 4.8528%, its highest level since November 2023, according to Reuters.

The rise in yields illustrated the difficulty facing the Treasury as it attempts to stabilize the long-term bond market.

Buying Treasury securities can increase their prices and lower their yields, but the effect can be overwhelmed by broader forces such as inflation expectations, government borrowing requirements, Federal Reserve policy and investor demand.

The Treasury's buyback program comes amid a broader sell-off in government bonds. Thirty-year Treasury yields recently reached their highest level since 2007, while the 10-year yield has reached a level not seen since 2023.

The effectiveness of the enlarged buyback program remains uncertain. Analysts had expected the Treasury might need to announce a larger operation to produce a stronger market reaction.