U.S. Treasury could tap nearly $1 trillion to finance expanded bond buyback program
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A senior U.S. Treasury official said the Treasury could use nearly $1T from the Treasury General Account to fund an expanded buyback program, potentially amplifying its ability to manage long-end yields. The surprise doubling of off-the-run long-term bond buybacks to at least $4B supports demand for duration, reinforcing the latest rally in Treasuries as the 10Y yield fell to 4.70%. Funding choices versus bill issuance remain a key variable for liquidity conditions.
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Huoxing Finance reported that on Aug. 24 a senior U.S. Treasury official said the department may draw on nearly $1 trillion from its Treasury General Account (TGA) to fund its recently announced expansion of the Treasury buyback program. Using the TGA would give the Treasury a powerful lever to affect long-term bond yields.
Last week, the Treasury said it would double buybacks of off-the-run long-term bonds to at least $4 billion from $2 billion, a move that surprised markets. Treasury Secretary Bentsen said actual buyback volumes could exceed the new minimum. The Treasury has not disclosed how the buybacks will be funded.
Many market participants had expected the Treasury to finance the operation by issuing short-term Treasury bills, an option the official did not rule out. BIT (bit.com) data showed Treasuries extended gains, with the 10-year yield down 4 basis points to 4.70%.
