Citadel Securities has warned that the U.S. Treasury’s expanded bond buyback program could amount to financial repression, risking a weaker dollar and higher inflation. In a client note, Nohshad Shah, Citadel’s head of EMEA fixed-income sales, described the initiative as marginal financial repression that shifts market pressure rather than eliminating it.
Treasury Secretary Scott Bessent expanded the buyback program last week, doubling operations for 10- to 30-year securities to address elevated long-term yields. The administration has expressed discomfort with the rise in borrowing costs, which have reached multi-year highs. Funding for the purchases may come from the Treasury General Account, the department’s cash balance held at the Federal Reserve, according to a CNBC report on Monday.
The program has provided limited support to the bond market. However, 30-year Treasury bonds erased their gains a day after the announcement, and the dollar has since weakened while gold prices have rallied. The increase in long-term yields reflects loose fiscal and monetary policies amid a fully employed economy and significant investment in artificial intelligence.
Shah noted that preventing Treasuries from clearing at lower prices does not resolve underlying market pressures but merely redistributes them. The warning underscores concerns that the buyback strategy could exacerbate inflationary pressures and undermine the dollar’s strength.
