The U.S. Treasury Department doubled its bond buyback program to $4 billion per operation, focusing on longer-dated government securities with maturities between 10 and 30 years. The announcement came as U.S. sovereign debt surpassed a record $40 trillion on Wednesday, amid rising long-term borrowing costs driven by competition for capital from AI data-center construction and concerns over government deficits.
Yields on targeted bonds initially eased following the Treasury’s announcement but resumed their upward trajectory on Thursday. Treasury Secretary Scott Bessent, speaking to CNBC, emphasized that the expanded purchases aim to ensure yields reflect economic fundamentals rather than market distortions. He also indicated the program could be expanded further, depending on market conditions.
Bessent clarified that the Treasury’s buyback initiative operates independently of Federal Reserve policy, stating that any potential Fed rate hike to address inflation is not connected to the buyback decision. The Treasury and Fed will coordinate on balance sheet adjustments, he added, though the programs remain distinct in their objectives.
Federal Reserve Chairman Kevin Warsh, in remarks last month, reiterated the central bank’s commitment to returning inflation to 2%, noting that yields had risen since the Fed’s prior meeting. He also suggested the Fed should prioritize market signals over dictating them, underscoring the evolving dynamics between fiscal and monetary policy in managing debt and inflation pressures.
