Bessent confirms Treasury auctions continue amid buyback increase

Key Points:

• Treasury Secretary Scott Bessent confirmed that the U.S. Treasury will continue its regular schedule of debt auctions despite increasing the size of buybacks for longer-dated securities, with new buyback rules taking effect on September 9.
• The Treasury's maximum buyback authority will rise from $2 billion to at least $4 billion per operation to enhance liquidity in longer-term Treasurys, particularly the 30-year bonds, amid competition from higher-yield corporate bonds.
• The increase in buybacks aims to support market liquidity and lower yields in a thinly traded segment, though yields on 10-, 20-, and 30-year Treasurys have only seen modest declines following the announcement.
• The Treasury General Account (TGA) at the Federal Reserve, currently holding about $940 billion, may be used to fund these buybacks, potentially reducing the need to issue new short-term debt but also drawing down cash reserves.
• The announcement comes as the U.S. national debt surpassed $40 trillion for the first time, raising concerns about higher Treasury yields increasing the government's interest payment burden.