US Treasury bond buybacks fail to calm markets as yields spike

The US Treasury's plan to double its bond buyback program has failed to reassure investors, with long-term yields quickly reversing their initial decline. The 30-year Treasury yield rose to 5.24% on Thursday, erasing most of the drop that followed the announcement, as concerns about fiscal deficits and geopolitical tensions persist Source: Milenio.

What happened

On Wednesday, Treasury Secretary Scott Bessent announced the department would at least double its buyback operations for bonds with maturities between 10 and 30 years, from $2 billion to a minimum of $4 billion per operation, effective September 9 through November 4 Source: Milenio. Bessent later said the amount could exceed $4 billion per operation, emphasizing that the move aims to support liquidity in a thin market Source: infobae.

The reaction

Despite the intervention, yields on 30-year bonds climbed back to 5.24% on Thursday, and the 10-year yield rose to 4.7%, signaling that investors remain skeptical Source: Euronews (Español). Analysts criticized the plan as insufficient. Eoin Walsh of TwentyFour Asset Management called it a "curita" (band-aid), while Krishna Guha of Evercore ISI described it as a "debilitated version of Operation Twist" Source: Milenio. Joe Brusuelas of RSM US argued that without fiscal consolidation, the buybacks will only be temporary Source: infobae.

What's next

Bessent indicated that the administration will announce a fiscal consolidation plan in the coming days, focusing on both revenue and spending Source: Euronews (Español). He downplayed the significance of the national debt surpassing $40 trillion, saying "there is nothing magical" about the figure Source: infobae. However, the market's reaction suggests that investors are not convinced, as the dollar also weakened following the announcement Source: Milenio.