On September 9th, the US Department of the Treasury announced that in the debt repurchase operation scheduled for September 10th, the maximum repurchase amount will be increased to $60 billion. This move aims to target the 10 to 20-year bonds with lower liquidity. It is a concrete implementation of Treasury Secretary Scott Bessent’s previous commitment to “at least double” the repurchase size. This expansion, three times larger than usual at around $20 billion, is intended to support liquidity in the bond market.
However, the market response was an increase in yields rather than a decrease. Following the announcement, the yield on the 10-year US Treasury bond briefly rose to around 4.85%, marking a nearly three-year high. Yields on the 20 and 30-year bonds also increased simultaneously, approaching or exceeding 5.3%. Market analysts widely believe that the repurchase size fell below the expectations of some investors (with some institutions initially estimating it could reach $8 to $10 billion), thus failing to effectively curb the rise in yields.
Normally, government debt repurchases can reduce the market’s circulating supply, boosting bond prices and lowering yields. However, following this operation, long-term yields further increased, indicating investor doubts about the effectiveness of the Treasury Department’s intervention. The rise in US bond yields will push up costs for mortgages, corporate borrowing, and potentially put pressure on the stock market.
This year, the issuance of US Treasury bonds has increased compared to the previous year, with the overall debt size continuing to expand. Analysis points out that the rise in yields is influenced by multiple factors, including high government debt levels, tariff policies, geopolitical risks related to Iran, and inflation concerns triggered by rising oil prices.
Many market experts believe that this expanded repurchase will be difficult to reverse the overall trend. Mark Spindel, Chief Investment Officer of Potomac River Capital, noted that this move falls far short of the massive interventions during the financial crisis. Robert Tipp, Chief Investment Strategist and Global Bonds Head at PGIM Credit, also stated that with the Treasury Department still issuing a large amount of new bonds, solely relying on this limited-scale repurchase is unlikely to effectively control long-term yields.
Wall Street prominent investor Stanley Druckenmiller also warned that once the market perceives official interventions as “defending prices,” each increase in yields will test the authorities’ determination, which could eventually require continuously increasing repurchases to maintain stability. Several analysts emphasize that the core issue driving up borrowing costs remains the continuously expanding fiscal deficit, with repurchases only addressing the symptoms but not the root cause.
The market is closely monitoring the subsequent execution of repurchases and whether the Treasury Department will further expand its intervention scale.