US Treasury to Keep Regular Debt Auctions Despite Bigger Bond Buybacks
Treasury Secretary Bessent confirms regular debt auctions will continue despite larger buybacks of long-dated bonds, starting September 10.
US Treasury Secretary Scott Bessent said on Monday that the department will continue with its regularly scheduled debt auctions, including for long-dated bonds, even as it moves to increase the size of its buybacks of 10- to 30-year securities.
Speaking at a news conference focused on Iran sanctions, Bessent said the Treasury would "continue with our regular program of auctions" announced in early August. He added that no bonds have yet been purchased under the enlarged buyback program, which is set to begin on September 10 for 10- and 20-year maturities.
The announcement last week that the Treasury would double its quarterly repurchases of longer-dated bonds came after yields reached their highest levels in nearly two decades. The move briefly helped bring down yields on 10-year notes and 20- and 30-year bonds, offering some relief from rising federal debt service costs. However, most of those declines were retraced by the end of the week, with yields down only modestly on Monday.
Bessent, a former hedge fund manager, has argued that the recent yield upswing was not justified given the strength of the US economy. He has also pointed to the administration's plans to curtail government spending as the national debt has surpassed $40 trillion.
The funding source for the expanded buybacks has not been specified, though the Treasury General Account (TGA) at the Federal Reserve is one option. Tapping that account would avoid issuing new shorter-dated Treasuries to finance the purchases, but would draw down the government's cash reserves. The TGA, which acts as the federal government's checking account, stood at about $940 billion as of last Wednesday.
Treasury has built up the TGA this year partly to cover roughly $166 billion in refunds owed to importers after the Supreme Court ruled a portion of President Donald Trump's tariffs illegal. A larger cash buffer could also provide leverage in potential debt ceiling negotiations with Congress.
This marks the latest in a series of interventionist moves by Bessent, who earlier this month participated in the first joint intervention in the Japanese yen in 15 years. He has said the buybacks aim to support liquidity in a thinly traded part of the market, particularly during August, when competition from corporate issuance at higher yields is strong.