US Treasury Buys Fewer Long-Dated Bonds Than Expected

The United States Department of the Treasury is purchasing fewer long-dated bonds than expected through its buyback program, even after increasing the repurchase cap from $2 billion to $6 billion. In recent operations, the agency accepted only about half of the offered bonds and failed to reach its stated cap, with purchases concentrated in a small number of specific issues.

Treasury Secretary Scott Bessent described the program as a technical measure designed to improve liquidity for older, less liquid government bonds, specifically low-coupon securities issued during the COVID-19 pandemic.

The execution and timing of the program have created disagreement among investors. Some market participants view the buybacks as a debt-management strategy to retire cheap debt, while others initially saw the out-of-cycle expansion as an effort to cap rising yields. While long-end yields continue to climb, some analysts suggest the program is successfully narrowing the swap spread.