US Treasury to Maintain Debt Auction Schedule Alongside Increased Bond Buybacks

The U.S. Treasury will proceed with its regularly scheduled debt auctions, including for long-dated bonds, despite a recent decision to significantly increase the size of its bond buyback program, Treasury Secretary Scott Bessent said Monday.

No Change to Auction Plans

Speaking at a news conference, Bessent affirmed that the department would “continue with our regular program of auctions” that was announced in early August. He noted that the enlarged buybacks, which target 10- to 30-year securities, have not yet begun.

The increased repurchases are scheduled to start on September 10 for 10- and 20-year bonds. The move follows last week's surprise announcement that the Treasury would double its quarterly buybacks to at least $4 billion per operation.

Market Impact and Context

The buyback expansion is an interventionist tactic aimed at taming yields on long-term government debt, which recently reached their highest levels in nearly two decades. The initial announcement provided temporary relief, briefly lowering yields on 10-, 20-, and 30-year bonds, but the effect was short-lived as yields had largely retraced those declines by the end of last week.

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Bessent has argued that the sharp rise in yields was not justified by the U.S. economy's strength. He stated last week that a key objective of the buybacks is to support liquidity in the market for longer-dated bonds, which can be thinly traded and has faced competition from a high volume of corporate debt issuance.

Funding the Buybacks

While the Treasury has not officially indicated the funding source for the repurchases, it could tap the Treasury General Account (TGA) at the Federal Reserve. Using the TGA, which stood at approximately $940 billion as of last Wednesday, would allow the Treasury to fund the buybacks without issuing new, shorter-dated debt, which could otherwise disrupt the program's goal of managing the yield curve.

The TGA serves as the federal government's primary checking account. Any borrowing to finance the buybacks would need to be at shorter maturities to avoid undermining the effort to boost demand for long-term bonds.