Treasury Secretary Scott Bessent says the US government could increase bond buybacks beyond $4bn per operation as it seeks to calm a troubled long-term Treasury market, with bitcoin rising above $72,000.
The Treasury Department announced on Wednesday that it would at least double the maximum size of its liquidity-support purchases of longer-dated government securities. From 9 September until 4 November, the minimum operation size will rise from $2bn to $4bn.
“We’re going to increase the size of the buyback,” Bessent told CNBC during an interview on Thursday. “I would note that it could be more than the 4 billion per issue.”
Bessent said the Treasury had a “big toolkit” available and suggested the move was also intended to signal that current bond yields did not accurately reflect the underlying strength of the US economy. The programme will focus on Treasury securities with maturities of between 10 and 30 years.
The buybacks do not cancel government debt. Instead, the Treasury will purchase older, less frequently traded securities – known as off-the-run Treasurys – while continuing to issue new debt to fund federal budget deficits and refinance obligations that are coming due.
By buying those less-liquid bonds, the Treasury can add liquidity to parts of the market where trading conditions have become more difficult and support prices. Bond prices and yields move in opposite directions, so higher prices resulting from the purchases could help push yields lower.
That matters across the wider economy because Treasury yields influence borrowing costs, including mortgage rates, corporate finance and other long-term loans.
The intervention comes after the 30-year Treasury yield rose to about 5.33% to 5.34% earlier this week, its highest level since 2007. At the same time, total US public debt passed $40 trillion, highlighting concerns over continued government borrowing, persistent deficits and rising federal interest payments.
Financial markets reacted quickly to Wednesday’s announcement. The 30-year yield fell by about eight to 10 basis points, while the 10-year yield also declined. One basis point is one-hundredth of a percentage point.
Some of that fall was later reversed as investors assessed the likely impact of a programme that remains small compared with the size of the Treasury market.
Bitcoin moved sharply higher. The cryptocurrency had been trading in the mid-$64,000 range before the announcement, but climbed towards $69,000 to $70,000 on Wednesday before extending its rise on Thursday. At about 11:40 BST on 20 August, bitcoin was trading above $72,000.
Lower Treasury yields can make assets that do not pay interest, such as bitcoin and gold, more appealing by comparison. A weaker dollar and renewed demand for riskier assets added to the momentum, while large-scale liquidations of cryptocurrency short positions accelerated the increase as traders betting on a fall were forced to close their positions.
However, the size of the programme underlines its limitations. The Treasury market contains about $32 trillion in outstanding securities, so even purchases exceeding $4bn represent only a very small proportion of the overall market.
The buybacks also cannot reduce the national debt. The Treasury will continue issuing securities to finance federal spending, meaning the programme changes the composition and liquidity of the market rather than eliminating the government’s borrowing obligations.
Investors will therefore be assessing whether Bessent’s intervention can produce a lasting decline in long-term yields or merely provide temporary relief. The Treasury has said further information on future buyback sizes will be included in its next Quarterly Refunding announcement.
The first expanded operations are expected in September, with purchases targeting securities in the 10-to-20-year and 20-to-30-year maturity ranges.
Markets will focus on how aggressively the Treasury uses its increased flexibility, whether long-term yields begin rising again and whether bitcoin can hold on to the gains that followed Washington’s intervention in the bond market.
