Treasury to Use Cash Reserves for Expanded Bond Buybacks

The United States Department of the Treasury is considering using its Treasury General Account (TGA) to fund an expanded program to purchase off-the-run government bonds. Treasury Secretary Scott Bessent recently announced that the department will double the size of buybacks for long-term securities from $2 billion to at least $4 billion per operation, with activities scheduled from September 9 through November 4, 2026.

While market participants expected the Treasury to fund these purchases by selling short-term bills—a strategy Bessent called a "Treasury Twist"—senior officials indicated that the TGA, which holds approximately $950 billion, is available as an additional funding source. This approach would allow the Treasury to avoid replacing existing debt with new debt. Officials stated that drawing down these reserves poses no immediate risk, as the next debt ceiling impasse is not projected until winter or early spring of next year.

The move aims to influence long-term bond yields and stabilize a 30-year sector Bessent described as having "very poor" conditions. Following the announcement, the yield curve flattened as short-end yields rose and long-end yields fell, while prices for gold and bitcoin increased. Some analysts argue the timing contradicts the Treasury's goal of being "regular and predictable," suggesting investors might demand higher premiums due to perceived market manipulation.