The U.S. Treasury is doubling the size of its buybacks of long-term government bonds as rising yields put pressure on financial markets and borrowing costs.
The Treasury said Wednesday that it will increase buybacks of 10- to 30-year Treasury securities to at least $4 billion per operation, up from the previously planned $2 billion. The changes will take effect from Sept. 9 through Nov. 4.
The move comes a day after the 30-year Treasury yield reached its highest level since 2007. Investors have been selling long-term bonds amid concerns about inflation, government spending and the US fiscal outlook.
The Treasury said the larger buybacks are intended to support liquidity in long-term debt markets where there is strong investor demand.
The increase will add at least $14 billion to planned buybacks during the current quarter, a small amount compared with the more than $40 trillion in total US government debt.
Higher Treasury yields raise borrowing costs for households, companies and the government. Analysts said the buybacks could help support the long end of the bond market, although they do not reduce the federal deficit or overall debt.
Citi’s global head of USD and CAD swaps trading, Dan Gottlander, said the move could have a significant impact on long-term bonds. However, he noted that the Treasury would still need to issue debt to finance government spending, potentially increasing issuance of shorter-term Treasury bills or bonds with maturities of five to 10 years.
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