Treasury’s Tripled Buyback Fails to Pull Long Yields Down

The Treasury Department said it would buy back up to three times its usual amount of long-term debt, part of the Trump administration’s continuing effort to bring borrowing costs down⁸. The first operation was set to purchase up to $6 billion of older Treasury securities with maturities between 10 and 20 years⁷. That was more than the $4 billion minimum Treasury Secretary Scott Bessent had outlined last month as part of an effort to improve liquidity in long-dated debt⁴. GoldSeek described the programme as triple the normal level¹⁰.

Yields went the other way. Treasury yields jumped to their highest levels in almost three years on Wednesday, after the $6bn buyback plan was announced². The 10-year yield reached 4.85%, its highest since November 2023, and stocks fell⁹. By Thursday the 10-year topped 4.9%, the highest since 2023, as US oil prices rose and lifted inflation fears³. The gap between US and Chinese government borrowing costs widened to the widest level ever recorded².

Why it matters to investors

The strain showed at the long end. The Treasury sold $22 billion of 30-year bonds at a high yield of 5.308%⁷. That was up from 5.216 per cent at the previous sale last month, and it came as a global bond sell-off reignited with oil jumping to $107⁶.

Demand for shorter paper was not the problem. The 10-year auction drew the highest bid-to-cover ratio in a decade, with the $39 billion reopening attracting the strongest demand since 2016¹¹. GoldSeek also logged strong demand at that 10-year sale¹⁰.

What to watch

The verdicts on the first round were uniform. Bloomberg wrote that traders won the opening round of the yield showdown with Bessent, and that his challenge to traders is off to a rocky start¹. Reuters described bond investors as edgy and unconsoled by the big buyback⁴. Axios said the buyback failed to shock and awe the bond market, and that Bessent’s unusual showdown with the markets could itself be adding to the move⁵.

One account put the day at its plainest: the $6 billion buyback backfired and yields jumped, with Stanley Druckenmiller warning about the position the Treasury secretary now occupies⁹. The next tests are the pace of the buyback operations, which are meant to run at the tripled size⁸, and oil, which CNBC tied directly to Thursday’s move in yields³.