The US Treasury plans to keep its regular schedule of debt auctions, including sales of longer-dated bonds, even as it expands its programme of Treasury buybacks, according to a report by Reuters citing comment made by Secretary Scott Bessent on Monday.
Speaking at a press conference focused on new sanctions against Iran, Bessent said the department would proceed with the auction programme outlined earlier this month. The Treasury has not yet purchased any securities under the expanded buyback programme, with the first larger operations for 10- and 20-year bonds due to begin on 10 September.
The decision comes after Bessent last week announced that the Treasury would double the size of its quarterly purchases of longer-maturity debt. The move followed a sharp rise in long-term Treasury yields to their highest levels in almost two decades.
The announcement initially pushed yields lower across the 10-, 20- and 30-year parts of the curve, offering some relief to the US government as elevated borrowing costs add to federal debt-service expenses. Much of that decline was subsequently reversed, although long-term yields edged lower again on Monday.
The Treasury has yet to disclose precisely how it intends to fund the larger buybacks.
One potential source is the Treasury General Account (TGA), the federal government’s cash account at the Federal Reserve. Using existing cash would allow the Treasury to conduct the purchases without issuing additional short-term debt, although it would reduce the government’s available reserves.
The TGA held roughly $940bn as of last Wednesday, compared with an average of around $840bn over the past year. The balance has been built up in part to accommodate about $166bn in refunds owed to importers following a Supreme Court ruling that invalidated a significant portion of President Donald Trump’s tariffs.
Unlike the Federal Reserve, the Treasury cannot create money to finance its operations. If it opts to replenish cash used for buybacks through borrowing, the additional issuance would likely need to be concentrated in shorter maturities. That would preserve the objective of the buyback programme: improving liquidity in the longer-dated Treasury market rather than increasing supply in the very sector the department is seeking to support.
The Treasury has said the expanded purchases are intended to improve market functioning in a part of the government bond market that can become particularly thin during periods such as August. The long-end of the Treasury curve is also facing competition from heavy corporate bond issuance, including debt raised to finance artificial-intelligence infrastructure.
The buyback expansion represents another example of Bessent taking a more active role in markets.
He has argued that the recent surge in Treasury yields was out of proportion to the strength of the US economy, while pointing to the Trump administration’s plans to reduce government spending and contain the country’s rapidly expanding debt burden.
The US government’s outstanding debt recently surpassed $40tn, increasing pressure on policymakers to manage borrowing costs and Treasury market liquidity.
Under the expanded programme, Treasury plans to conduct buybacks of 10- to 30-year securities worth at least $4bn per operation during the coming quarter.
Bessent, a former hedge fund manager with extensive experience in sovereign debt and foreign exchange markets, has also taken a more active approach to currencies. Earlier this month, he participated in the first joint US-Japanese intervention in the yen market in 15 years.C
