Treasury expands long-dated bond buyback to $6 billion, yields keep climbing
The U.S. Treasury announced a $6 billion repurchase of 10- to 20-year bonds, three times its previous limit, but the move did little to curb rising long-term yields.
The Treasury said on Wednesday it will purchase up to $6 billion of debt maturing in 10 to 20 years, tripling the size of its prior buyback program that was capped at $2 billion. The increase exceeds the $4 billion minimum outlined by Treasury Secretary Scott Bessent last month and is scheduled for Thursday.
Following the announcement, the benchmark 10-year Treasury yield rose to its highest level since November 2023, while the 20-year and 30-year yields also reached multi-week peaks. The gains came amid higher producer-price data and oil prices above $100 per barrel.
"There was the feeling in the marketplace that the Treasury could have made a statement," said Padhraic Garvey, head of global rates and debt strategy at ING, noting some participants had expected a buyback as large as $10 billion. "I suspect this is just the opening gambit."
Analysts said the $6 billion operation is modest relative to the roughly $32 trillion Treasury market and is unlikely to shift the broader supply-demand dynamics that have pushed yields higher over the past three months. They also noted investors may be looking for assurance that the $6 billion figure is a floor rather than a ceiling for future purchases.
"The market is probably thinking that with the Treasury looking at this and trying to keep a ceiling on yields, that it's a bigger problem than we think it is in terms of the deficits and outstanding debt," said Jim Barnes, director of fixed income at Bryn Mawr Trust.
The response highlights the limited impact of buybacks, which can improve liquidity in older securities but do not address underlying factors such as expanding deficits, persistent inflation and increased global bond issuance.
"Treasury buybacks are unlikely to materially alter the diverse forces raising yields, including widening federal deficits, sticky inflation and increased global bond issuance," said Tony Miano, investment strategy analyst at Wells Fargo Investment Institute.