US Treasury's bond buyback boost fizzles out in a day

Long-term US Treasury yields, which had briefly retreated after the Treasury Department announced it would more than double its bond buyback program, largely returned to their prior levels Thursday (local time) — just one day after the announcement. The 10-year yield actually climbed above where it stood before the buyback doubling was unveiled. The market's expectation that government intervention without resolving structural causes would prove a stopgap was confirmed within a day, even as the Treasury signaled it could deploy additional policy tools.

The 30-year Treasury yield rose about 7 basis points (1 bp = 0.01 percentage point) during trading Thursday, briefly touching 5.27%. That is little different from the 5.28% level it held before the Treasury's buyback expansion announcement — a level that had itself spiked to 5.31% in the days prior. The 10-year yield, the global benchmark for market interest rates, climbed to 4.71%, approaching its highest level since early 2025.

The 30-year yield had dropped roughly 10 basis points to around 5.18% immediately after the buyback doubling was announced, but it reclaimed virtually all of that ground within a day. Markets described the reversal as entirely predictable.

Even immediately after the buyback announcement, markets said the doubling was a stopgap — a drop in the bucket — given that structural factors remained intact: the United States' massive fiscal deficit, inflation concerns and a surge in corporate bond supply driven by the AI investment boom.

The announcement was particularly notable because it came on the same day US national debt surpassed $40 trillion for the first time in history, heightening calls for the government to address the fiscal deficit at its root. Markets are rife with concern that a vicious cycle will persist — soaring government debt pushes Treasury yields higher, and those higher yields in turn inflate the government's own interest costs.

Dutch financial group ING said in a report Thursday that the Treasury's intervention was received positively by investors, but added that "with US national debt at $40 trillion, increasing Treasury buybacks by $2 billion to support liquidity can look like rearranging the deck chairs on the Titanic." The implication: the government is offering secondary measures while leaving the fundamental problem of national debt unresolved.

Maia Crook, a senior research analyst at JPMorgan Chase, said Thursday's action "brought long-end yields down to some extent, but the more lasting impact is the potential for risk premiums to rise as the Treasury intervenes in markets and departs from the principle of being 'regular and predictable.'" The concern is that unexpected interventions — doubling buybacks, jointly intervening in currency markets with Japan — could end up pushing risk premiums higher rather than lower.

A prolonged outlook for rising global oil prices, driven by an extended war involving Iran, also contributed to the rebound in long-end yields. Oil prices rose more than 3 percent Thursday morning, adding upward pressure on inflation.

Treasury Secretary Scott Bessent signaled the government could introduce additional policy tools. In an interview with CNBC on Thursday, he said the scale of long-term bond buybacks could exceed the $4 billion per operation announced Wednesday.

"We have a lot of policy tools, so we'll see," Bessent said. "Part of this is signaling here, and showing that Treasury yields are not properly reflecting the underlying economic fundamentals."

He added that the Treasury would make an announcement "this week or early next week" placing greater emphasis on fiscal consolidation.