Treasury Doubles Buyback Auctions, Replacing Old Low-Coupon Debt with Costlier Borrowing
The U.S. Treasury Department has announced it will increase buyback auctions for 10-year, 20-year, and 30-year Treasury securities, raising the maximum per auction from $2 billion to $4 billion. This initiative will take place from September 9 to November 4, featuring seven auctions that will elevate total buybacks from $14 billion to $28 billion. Treasury Secretary Scott Bessent is facing backlash, as the additional $14 billion represents just 0.14% of nearly $10 trillion in outstanding notes and bonds. Since the Treasury cannot create money, these buybacks substitute less expensive debt with pricier new debt. Following this news, yields on 10-year and 30-year securities dropped by 5 and 8 basis points, although critics claim the impact will be short-lived.
Key facts
- The Treasury will double buyback auction sizes from $2 billion to $4 billion per auction.
- Seven buyback auctions are scheduled between September 9 and November 4, covering 10-20 and 20-30 year sectors.
- Total planned buybacks increase from $14 billion to $28 billion in the period.
- Outstanding 10-year notes total $4.4 trillion, and 20/30-year bonds total $5.5 trillion.
- The additional $14 billion in buybacks equals roughly 0.14% of outstanding securities.
- The Treasury cannot create money, so it borrows to fund buybacks, swapping cheap old debt for expensive new debt.
- Key buyback example: a 30-year bond with 1.875% coupon was repurchased at 52.375 cents on the dollar.
- Following the announcement, 10-year yields fell about 5 basis points and 30-year yields about 8 basis points.
Entities
Institutions
- U.S. Treasury Department
- Federal Reserve
- Wolf Street
Locations
- United States
- Japan