U.S. Treasury Expands Bond Buyback Program to $4 Billion

The U.S. Treasury has increased the minimum size of its long-term Treasury liquidity support buyback program to $4 billion per session. This is an expansion from the previous maximum of $2 billion and will be in effect from September 9 to November 4. This measure is aimed at enhancing the trading liquidity of already issued long-term Treasury bonds rather than reducing new debt, with high-quality sell offers continuing in the long nominal bond segment. The Treasury buyback is a system where the government repurchases existing Treasury bonds from the market, used to bolster the liquidity of non-maturing Treasury bonds and reduce price volatility. Market reactions were first seen in the bond sector, with the 30-year U.S. Treasury yield dropping significantly after the announcement. However, in the foreign exchange market, the dollar showed weakness against major currencies, and some participants interpreted this action as leading to increased dollar circulation. Treasury Secretary Scott Bessen noted that the buyback size could exceed $4 billion and claimed that the U.S. Treasury market has performed well among similar markets this year. However, it is difficult to attribute the dollar's weakness solely to this Treasury action, as the market is also considering long-term interest rates, fiscal deficits, and the Federal Reserve's interest rate path. The expanded buyback criteria will take effect from September 9, and the Treasury will announce the next quarterly regular repurchase schedule and future buyback sizes on November 4.

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