US Treasury Expands Long-Dated Bond Buybacks, Driving Yields Lower
- US Treasury doubles buybacks to $4B for 10-30yr bonds, effective Sept 9.
- Sec. Bessent targets 20-year high yields; dollar hits 3-month low.
- $40T+ debt, T-bill funding, “Operation Twist” parallels, investor jitters persist.
The US Treasury Department announced an expansion of its liquidity-support buyback operations for longer-dated securities, effective September 9, 2026. The maximum purchase size per operation will at least double, increasing from $2 billion to a minimum of $4 billion. This initiative targets the 10- to 20-year and 20- to 30-year segments of the Treasury market, which have recently experienced significant upward pressure on yields, reaching levels not seen in nearly two decades [STORY_ID: f0050093-582e-4f6c-af18-5fe7a789174]. The announcement prompted a sharp rally in the longest-dated US government bonds, resulting in a notable decline in their yields. This move aims to provide additional demand and alleviate concerns related to fiscal, inflation, and supply risks in the fixed income market.
The US Treasury announced it will at least double the maximum size of its liquidity support buyback operations for longer-dated nominal coupon securities to at least $4 billion per operation, up from the previous $2 billion cap. This increase applies to securities with maturities ranging from 10 to 20 years and 20 to 30 years. The measure is effective September 9. The Treasury’s stated intent for the expanded buybacks is to enhance market liquidity and address upward pressure on long-end yields.
US Treasury Secretary Scott Bessent initiated the expanded long-dated bond buybacks in an attempt to rein-in long-term borrowing costs. This move followed 10-year, 20-year, and 30-year Treasury note yields reaching 20-year highs this week, with the 30-year yield hitting its highest level since 2007. The Treasury’s action also aims to counterbalance investor concern over high inflation, leading to a decline in Treasury yields and the dollar.
The US Treasury’s expanded long-dated bond buybacks are expected to be financed through the issuance of short-term securities, including Treasury bills, a plan that is complicating the outlook for T-bill issuance. The move, initiated by the Trump administration, is drawing parallels to the Federal Reserve’s “Operation Twist,” a strategy last deployed in 2011 to reduce bond yields. Analysts also suggest the Treasury’s action implies a potential for further increases in buybacks beyond the initial doubling if market conditions require it.
A day prior to the US Treasury’s announcement of expanded long-dated bond buybacks, one or more investors significantly increased their positions in an exchange-traded fund (ETF) highly sensitive to long-term US bond yields. Separately, the Treasury Department also disclosed that the total US public debt has exceeded $40 trillion for the first time, representing a one-third surge in less than five years.
The US Treasury’s expanded long-dated bond buybacks led to stocks and precious metals surging higher, in addition to the previously reported decline in Treasury yields and the dollar. Following an initial sharp fall, the US 10-year Treasury yield was observed edging higher to 4.672% on Thursday, after reaching a low of 4.635% on Wednesday.
On Thursday, the 30-year US Treasury yield was observed at 5.2256%, rising 3 basis points. The 10-year US Treasury yield also edged higher by 1 basis point to 4.6723%. Concurrently, the US Dollar Index (DXY) fell below 99, with the dollar reaching its weakest level since mid-May overnight.
On Friday, longer-dated US government bond yields steadied, with the 30-year US Treasury note yield rising 1 basis point to 5.2508%. The 10-year US Treasury yield was largely unchanged at 4.7001%, and the 2-year Treasury note yield remained flat at 4.1828%. Market participants were observed focusing on Secretary Bessent’s comments implying willingness regarding future policy, rather than solely the mechanical impact of the buybacks. This occurred as investor jitters over the extended debt repurchase program and the soaring national debt continued to weigh on markets.
The US Treasury’s bond buyback policy is drawing comparisons to Japan’s historical efforts to contain borrowing costs, which previously resulted in prolonged currency weakness. Following these developments, the dollar is currently trading at a three-month low and is on track for its worst week this month.