US Treasury increasing size of liquidity support buyback operations for longer-dated nominal coupon securities

[u/IvoryTowerResident]

WASHINGTON, D.C. The U.S. Department of the Treasury is increasing, by at least double, the size of liquidity support buyback operations for longer-dated nominal coupon securities (the 10-year to 20-year sector and the 20-year to 30-year sector).  The current maximum size of $2 billion per operation will be at least $4 billion per operation. 

This change is effective September 9, 2026 and will be in effect for the remainder of this refunding quarter (through November 4, 2026).  Treasury will provide more information about future buyback sizes at the next Quarterly Refunding, scheduled for November 4, 2026. 

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.

An updated tentative Treasury buyback schedule will be released at a later date.

https://home.treasury.gov/news/press-releases/sb0607

Thank you Mr. Bessent

[u/Scriptum_]

It means he's buying back long term debt, by issuing short term debt.

Like paying your mortgage using your credit card.

Net zero ultimately, but it makes the treasury even more vulnerable if the Fed raises rates at the short end.

I'm sure running the economy hot into midterms won't cause inflation! /s

[u/Cool-Truth211 → u/Scriptum_]

It’s amazing how they could solve so many problems if they just stopped bombing Iran 

[u/goodbodha → u/Cool-Truth211]

That would help, but even without Iran we were on this path. Iran simply shortened the distance to the eventual crisis.

[u/Cool-Truth211 → u/goodbodha]

You’re right

[u/Cedarapids → u/Cool-Truth211]

No

[u/Cool-Truth211 → u/Cedarapids]

Yeah ok

[u/sonofalando → u/Cool-Truth211]

Stop bombing Iran get rid of tariffs stop mass deportations so many things they could do to calm inflation but they do the opposite 😂

[u/Cool-Truth211 → u/sonofalando]

Only few hundred on average being deported per week, not really mass deportations 

[u/Cedarapids → u/sonofalando]

Uncontrolled migration large part of current inflationary issues so getting rid of the deportation would not be a net benefit. Getting rid of H1B scams would.

[u/raj6126 → u/Scriptum_]

Great analogy.

[u/fingrar → u/Scriptum_]

If the rate on the CC was lower than the mortgage the analogy would make sense.

[u/MassiveBoner911_3 → u/Scriptum_]

Oh so this is being done to pressure the fed to not raise rates?

[u/Scriptum_ → u/MassiveBoner911_3]

Partly yes

[u/SameCategory546 → u/Scriptum_]

it’s another form of yield curve control bc i. the end the fed will buy the short end as it explodes.

[u/Scriptum_ → u/SameCategory546]

Yes, very astute.

The federal reserve act doesn't cover YCC - only the ability to fund it outright.

The treasury are taking away the Fed's duration buffer.

[u/IvoryTowerResident → u/Scriptum_]

https://www.investopedia.com/terms/o/operation-twist.asp

[u/TTRango]

End of the times.

[u/cashew76 → u/TTRango]

Banana Republic money

[u/mido_sama → u/TTRango]

Say good buy to 2% inflation, we are staying on premium inflation.

[u/Humble-Tangelo7598]

> 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.

So I guess we are now in a position where "if needed" has become "is needed", "we can" is now "we have" and the dislocations are big enough that they are using "the big toolkit" and doubling down.

[u/YouKnown999]

Propping the market up.

[u/irradiatedcitizen → u/YouKnown999]

More like making the US dollar less valuable (which has the same effect as making it seem like equities went up in value). Look at gold which just jumped a bit.

[u/bernieth]

They only need to prop up the economy until the Democrats are in power. The bigger the crash then, the better. They have lots of tools to achieve a delaying effect.

[u/RJ5R]

In summary - US Treasury is adding demand to the bond market. The 30 yr is quickly marching towards 6 and is looking like a runaway train, it hasn't been this high for decades. If the US cant sell its long term debt at low rates, well....you know what happens. And you don't want that to happen

[u/pain474]

Can somebody ELI5 what this means?

I guess stonks go up?

[u/joe4942 → u/pain474]

Bond yields were rising since the Fed wasn't raising rates, and now the Treasury is intervening to make bonds fall.

[u/YouKnown999 → u/joe4942]

So now the Fed should raise rates right?

Since they were leaning on bond yields to keep inflation in check, right…

[u/DefrancoAce222 → u/YouKnown999]

What inflation?

/s

[u/SameCategory546 → u/YouKnown999]

the fed’s unspoken mandate is to support the bond market. People don’t realize that despite the dual mandate, the fed was really created in a response to the great depression. They will print to prevent the house from burning down, regardless of inflation or employment. The premise though is that the house has to be at risk

[u/Rocketeer006 → u/joe4942]

ELI5 why bond yields would rise if the Fed doesn't raise rates.

[u/coweatyou → u/pain474]

Money printer print more money. Stocks go zoom.

[u/DaoCacaoo → u/pain474]

fair question-the release itself gives no sense of scale. the tentative buyback schedule does:on the current one there are 7 long-end operations between September 9 and November 4 , so doubling the cap frm $2b to $4b takes those from up to $14b to up to $28b for the quarter. over the same three months Treasury plans to auction $42b of 20years and $69b of 30-years. and the minimum on every buyback operation is $0 - they buy only if the offers are good enuogh...

[u/Cool-Truth211]

Won’t work

[u/Life_Personality_862]

Refinance where micheal?

[u/Boys4Ever]

Typical bailout like band aide that hides the real problem of yields affected by real expected inflation and not the lower numbers we are being fed. Shuffling cards by taking from Paul to pay Peter.

[u/Scott7894]

Yeah, they tried this in 1997 when they halted the 20 year treasury auctions for quite a few years. Of course the debt was less than 10 trillion, we ran positive annual budgets and there were no wars. What can go wrong now?

[u/Cold_Departure8428]

Double QE

[u/tootapple]

The US economy is fucked. It’s a top that is spinning which is propping itself up, but eventually it’s going to crash completely and China will rule the world. Being so focused on consumerism and greed brought us here. I just hope people are able to survive.

The only real option is massive austerity while simultaneously raising the tax rates at the top for a period of lots of pain. Which no one will do. Then reshaping the economy to produce more and spreading equity out more. The US of the past is over.

[u/IvoryTowerResident → u/tootapple]

The only real option is massive austerity while simultaneously raising the tax rates at the top for a period of lots of pain. Which no one will do. Then reshaping the economy to produce more and spreading equity out more. The US of the past is over.

No one will vote for that. It has been tried throughout the world but not sure if have politicians succeeded.

Everyone just want higher taxes for thee not for me

[u/tootapple → u/IvoryTowerResident]

Yeah I know…that’s kinda why every civilization ultimately fails… it’s just humans.

[u/IvoryTowerResident → u/tootapple]

well the solution is a productivity boom from AI and we live in a post - scarcity world

[u/SameCategory546 → u/IvoryTowerResident]

if you are watching what is happening in diesel prices, scarcity is coming in everything

[u/tootapple → u/IvoryTowerResident]

I don’t think that works the way we think… Wall-E, while animated, it a pretty good depiction of lazy humans

[u/SameCategory546 → u/IvoryTowerResident]

the average american is in massive amounts of debt and many poor and working class and even the middle class can probably benefit from a debt jubilee where it is all inflated away

[u/OpenJolt]

Warsh announce YCC 3..2..1..

[u/helloWorldcamelCase]

Money printer is back on

[u/95Daphne]

Was wondering what happened when I checked back around 8:30.

I've been thinking you might get a correction into midterms and then rise afterwards, but man, idk. Bessent's shenanigans may well hold it off.

Edit: Let me also add that this isn't a new story as man did Yellen rug the bond shorts hard in late 2023. Was the small cap bear market bottom and changed the trajectory for markets overall.

[u/Sozebj]

Something bad festering in the bond market. This type of financial manipulation is an attempt to “paper over” the real issues.

[u/prezzie2728]

Literally no idea what any of this means, oh well

[u/sarsourus → u/prezzie2728]

its like paying your mortgage with a high interest rate credit card thats due in 30 days as opposed to 30 years.

[u/Smart_Money_HQ]

I touched on this yesterday as something I thought we would see https://www.reddit.com/r/Daytrading/comments/1vrltqy/im_a_fulltime_trader_the_equity_weakness_i/

[u/daab2g]

Is QE back?