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Today, the US Treasury announced it is at least doubling its liquidity-support buyback operations for longer-dated government debt. Long-end yields fell sharply after this morning's release (chart). Treasury Secretary Scott Bessent is signaling that he will do whatever it takes to keep a lid on bond yields. His message to the Bond Vigilantes: "You folks aren't the only players in the bond market."
On November 1, 2023, Treasury Secretary Janet Yellen sent the same message to the Bond Vigilantes when the Treasury announced plans to finance more of the swelling federal government deficit with Treasury bills (chart). That reversed the yield spike that saw the 10-year Treasury yield soar from 4.00% in early August to 5.00% at the end of October that year. Apparently, Bessent is relying on Yellen's playbook given that marketable Treasury bills held by the public rose $1.0 trillion over the 12 months through July.
Treasury buybacks are structured to repurchase older, less liquid ("off-the-run") government bonds from primary dealers, freeing up dealer balance sheets and improving secondary market functioning. Here are the details of today's announcement:
- The Treasury is increasing its scheduled buyback operations for longer-dated nominal coupon securities from the prior cap of $2 billion to at least $4 billion per operation.
- The enlarged operations cover securities in the 10-year to 30-year sectors.
- The higher buyback limits will take effect starting September 9, 2026, and remain in place through the rest of the refunding quarter ending November 4, 2026.
The Treasury has the tools to influence the shape and level of the yield curve to some degree. Bessent intends to use them to counter any serious attempt by the Bond Vigilantes to push yields higher.
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