Source fx street
WASHINGTON — The U.S. Department of the Treasury announced it will at least double the size of its liquidity support buyback operations for longer-dated government debt, stepping up efforts to stabilize secondary trading and smooth friction at the far end of the yield curve.
Under the revised schedule, the Treasury will lift the maximum purchase cap from $2 billion to at least $4 billion per operation for nominal coupon securities in two key brackets: the 10-year to 20-year sector and the 20-year to 30-year sector. The changes will take effect on September 9 and run through November 4, coinciding with the department’s next quarterly refunding announcement.
The Treasury noted that the decision reflects strong market participation and a substantial volume of high-quality offers routinely submitted during longer-maturity buybacks.
Targeting Market Bottlenecks
The buyback framework, revived to serve as a regular debt-management mechanism, allows the government to repurchase older, “off-the-run” debt that trades less frequently than newly auctioned benchmark issues. By mopping up these less liquid securities, the Treasury helps primary dealers free up balance sheet capacity, narrowing price distortions between seasoned bonds and current issues.
Officials emphasized that the operational shift does not change total net borrowing or scheduled auction sizes for newly issued debt.
Market Reaction
Long-term Treasury yields retreated following the announcement, with the 30-year yield dropping nearly 10 basis points after hovering near multi-year highs. Analysts viewed the move as a timely intervention to prevent illiquidity from amplifying volatility across broader fixed-income markets amid heavy government debt supply.
The Treasury plans to release an updated tentative buyback calendar in the coming days, with future operation sizes to be reassessed during the November refunding review.
