(Bloomberg) -- The US Treasury unexpectedly announced it’s ramping up buybacks of long-dated government debt, taking the action in the wake of yields on such securities hitting the highest levels in years.
Just two weeks after releasing its planned schedule for buybacks this quarter, the Treasury Department on Wednesday said it’s “increasing, by at least double, the size of liquidity support buyback operations” for securities dated from the 10-year to the 30-year sector.
Treasury Secretary Scott Bessent invoked the buyback program last year as part of the department’s “big toolkit we can roll out” if needed to address dislocation in the Treasuries market.
“The point here is the timing,” said John Briggs, head of US rates strategy at Natixis North America. “It is not an accident, in my view, so the more important part is the signaling from it. If yields go too far, Treasury will try and fight it — and now we know where some pain points are.”
Officials made the announcement after 30-year bond yields this week revisited their highest levels since 2007. Traders are also preparing for a $16 billion auction of new 20-year bonds.
Yields tumbled across the board after the announcement, with 30-year rates falling as much as 9 basis points to 5.19%.
“This increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants, as evidenced by the significant volume of high-quality offers Treasury routinely receives in longer-dated buyback operations,” the Treasury said in its statement.
--With assistance from Edward Bolingbroke.
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