The Treasury Department will repurchase up to $6 billion of older 10- to 20-year government securities Thursday, tripling the size of its previous long-dated operation as officials seek to improve liquidity in a Treasury market facing sharply higher borrowing costs.
By yourNEWS Media Newsroom.
The Treasury Department will buy back as much as $6 billion in long-dated U.S. government debt Thursday, significantly expanding an operation intended to improve trading conditions in older Treasury securities as long-term yields climb to levels not seen in years.
Treasury announced the size of the Sept. 10 operation Wednesday, saying it will purchase eligible securities in the 10- to 20-year maturity range. The $6 billion maximum is three times the size of its previous long-dated operation and exceeds the minimum $4 billion level the department announced in August.
The department said Aug. 19 that it would at least double its longer-dated liquidity-support buybacks from the previous $2 billion maximum through the remainder of the quarterly refunding period. Treasury said the change was intended to provide greater liquidity in parts of the long-term government bond market where investors have regularly offered substantial volumes of older securities for repurchase.
Treasury buybacks allow the government to purchase older, less-liquid debt that can become harder to trade as newer securities replace it as market benchmarks. While such operations can influence market conditions, Treasury describes the long-dated purchases primarily as a liquidity-support program rather than a direct mechanism for setting long-term interest rates.
Bond yields moved higher following Wednesday’s announcement rather than lower. The benchmark 10-year Treasury yield climbed to about 4.85%, its highest level since November 2023, while the 30-year yield moved back above 5.3%, near its highest level since 2007.
Those increases also pressured equities. Major U.S. stock indexes fell Wednesday as investors confronted both rising Treasury yields and oil prices above $100 a barrel amid intensifying Middle East conflict. Higher yields on government debt can make stocks comparatively less attractive while also raising borrowing costs throughout the economy.
“The equity market has been remarkable in the way that it’s been able to look through or look past these rising yields, because they’ve sort of been on the higher side for some time now,” Natalia Lojevsky, managing director at CIFC Asset Management, said in an emailed note.
“But eventually, it starts to catch up, and I think that’s what’s happening.”
The latest operation follows other Treasury buybacks conducted in recent weeks, including a $12.5 billion cash-management operation Sept. 3 and a $4 billion operation Aug. 25. Treasury said at its August quarterly refunding that it expected to repurchase as much as $38 billion in off-the-run securities for liquidity support during the quarter, along with up to $25 billion of securities maturing within one month to two years for cash-management purposes.
The department’s approach to financial markets has received additional attention following comments from Treasury Secretary Scott Bessent about the government’s ability to intervene when market conditions threaten broader U.S. interests.
Speaking at Southern Methodist University in Texas, Bessent pointed to the Treasury’s involvement in a rare joint U.S.-Japanese effort to support the yen and emphasized the informational advantage government policymakers can have over traders.
“I am the house now, so when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan, is going to do, what Japanese policymakers are going to do,” Bessent said.
“And you can bet against me if you want.”
Bessent also described himself as having “asymmetric information,” according to reporting on the event. The United States joined Japan in currency-market intervention on July 31 as officials sought to prevent further yen weakness and instability in Japanese government bonds.
The yen has since strengthened by roughly 4% over the past month and was trading around 153 per U.S. dollar Wednesday, near a seven-month high. The currency is also receiving support from growing expectations that the Bank of Japan will raise interest rates again.
“The joint effort sent a strong signal that both countries are willing to aggressively defend the currency against further weakness and volatility,” Adam Turnquist, chief technical strategist at LPL Financial, said.
Markets are increasingly anticipating a quarter-point increase when the Bank of Japan concludes its Sept. 18 policy meeting, which would bring its benchmark rate to 1.25%, its highest level in more than three decades. Investors are also pricing the possibility of another increase later in the year.
“Better-than-expected GDP, rising inflation, and wage growth near 30-year highs have underpinned the hawkish repricing,” Turnquist added.
The larger Treasury buyback comes as policymakers confront elevated long-term borrowing costs despite efforts to improve market functioning. Mortgage rates have also risen, with the average 30-year fixed rate reaching 6.85% in the week ended Sept. 4, according to Mortgage Bankers Association data cited by Reuters.
Thursday’s $6 billion operation will therefore serve as an early test of Treasury’s expanded long-end buyback strategy, aimed at improving liquidity in older government securities at a time when yields across the long end of the market remain under significant upward pressure.
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