Treasury accepts 6 of 25 eligible issues in debt buyback

Treasury accepts 6 of 25 eligible issues in debt buyback

The U.S. Treasury Department has announced that it has accepted six out of the 25 eligible issues for its debt buyback program. The decision to include these specific issues in the buyback program comes as part of the Treasury's ongoing efforts to manage the $29 trillion Treasury market and lower borrowing costs over time [1].

The Treasury Department's buyback program, launched in May 2024, aims to enhance liquidity in the market and reduce borrowing costs for the U.S. government. The quarterly maximum Treasury buyback amount is expected to reach $45 billion to $50 billion, with repurchases in the 10-year to 20-year-plus buckets increasing to $10 billion from $4 billion [1].

The selected issues for the buyback program include a mix of Treasury notes and bonds, reflecting the Treasury's strategy to target longer-duration securities to lower yields. The Treasury Department's decision to focus on longer-duration bonds is part of its broader plan to lower the 10-year Treasury yield, which serves as a peg for various financial instruments such as mortgages and car loans [1].

Analysts have expressed mixed opinions regarding the effectiveness of the buyback program. While some argue that the program could help lower borrowing costs and enhance market liquidity, others caution that the impact may be limited given the scale of the Treasury market. Brij Khurana, a fixed-income portfolio manager at Wellington Management, noted that any potential uptick in longer-duration Treasury buybacks would be a "drop in the bucket" compared to the amount of Treasuries outstanding [1].

The Treasury's buyback program is part of a broader set of measures aimed at influencing demand for government debt. These measures include regulatory changes for big banks and the Trump-supported stablecoin bill, which could encourage more demand for Treasuries by increasing the reserves held by stablecoin issuers [1].

The Treasury Department's decision to accept six out of 25 eligible issues for the debt buyback program reflects its ongoing efforts to manage the Treasury market and lower borrowing costs. As the program continues to evolve, investors and financial professionals will closely monitor its impact on the broader economy and financial markets.

References:
[1] https://www.morningstar.com/news/marketwatch/20250716234/wall-street-braces-for-treasury-to-try-lowering-10-year-yields-with-more-buybacks-the-problem-it-could-backfire