Treasury to double government debt repurchases to $4 billion to calm surging yields

The Treasury Department on Wednesday said it will more than double the size of its government debt repurchases, sending yields sharply lower at a time of substantial market stress.

With fixed income markets under pressure and yields surging to levels not seen in nearly 20 years, the announcement targets the sensitive longer-duration part of the Treasury market.

Under the accelerated buyback, Treasury, led by Secretary Scott Bessent, will target the 10- to 20-year and 20- to 30-year portion of the market, which has seen a buyers' strike since late June. The government will "at least double" the maximum size of its buyback operations, from $2 billion to "at least" $4 billion, according to an announcement from the department.

Yields cratered following the announcement while stock market futures rose sharply.

The benchmark 10-year note closed down 5.7 basis points to 4.647% and the 30-year "long" bond tumbled 9 basis point to 5.196%. A basis point equals 0.01%. Yields and prices move in opposite directions.

In remarks later Wednesday, President Donald Trump said, "No, I don't think so" when asked if Americans should be worried about the bond market.

The change will start Sept. 9 and stay in effect through Nov. 4.

"This increase in buyback operation sizes reflects Treasury's desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants, as evidenced by the significant volume of high-quality offers Treasury routinely receives in longer-dated buyback operations," the department said in a statement.

At its core, the move means that Treasury will be a larger buyer of older, longer-duration debt, providing liquidity to a part of the market that historically has shown strong demand.

The stepped-up operation "can help crowd in potential buyers tempted by the prior run-up in yields and force some near-term short-covering, while discouraging investors from going max short in the future for fear of being ambushed again," Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a client note.

"But the operation changes almost nothing in terms of the fundamentals in particular the unchanged need to finance the tidal wave of hyperscaler debt in addition to very large government deficits," he added.

Moreover, the attempt to keep yields in check could end up making the Federal Reserve's job of getting inflation back to 2% more difficult, said RSM's chief economist, Joe Brusuelas. Fed Chairman Kevin Warsh has expressed a preference in the open market determining rates, and a move such as the one Treasury announced could artificially suppress yields and make inflation control more difficult.

"Bessent is a political actor. His interest is purely short term and is organized around the upcoming election and not a return to price stability," Brusuelas wrote.

Economist Mohamed El-Erian wrote on X that the planned purchases are "small in both absolute terms and relative to net issuance" and more about "a broader deployment of 'yield curve control.'"

In the most recent run-up in yields, market experts have pointed to various factors, including a higher term premium for holding government debt — essentially the extra yield that investors demand — as well as a changing profile of the Treasury buyer base. In addition, they cited increased supply of corporate debt, specifically related to artificial intelligence.

Wednesday's announcement signals that Treasury is attentive to the liquidity issues at the longer end and is willing to be a more active participant.

"This is NOT a debt paydown, it is just a rearrangement of the maturity schedule of Treasuries," wrote Peter Boockvar, chief investment officer at One Point BFG Wealth Partners.