Treasury ramps up debt buybacks after yield spike
The US Treasury unexpectedly announced it is ramping up buybacks of long-dated government debt, taking action after yields on such securities reached their highest levels in years. The announcement, made Wednesday, came just two weeks after the department released its planned schedule for buybacks this quarter.
According to the Treasury, the size of liquidity support buyback operations for securities ranging from the 10-year to the 30-year sector has been increased by at least double. The Treasury said in its statement that the increase reflects its desire to provide greater liquidity support in longer-dated nominal sectors.
The move had an immediate effect: the 30-year yield dropped nearly 10 basis points to 5.185%, pulling back from its highest level since 2007, as reported by the Financial Post. Officials made the announcement as long-dated government bond yields around the globe rose to significant levels, with the US 30-year trading at its highest since 2007. A 10-year auction last week drew the highest financing cost at that tenor since 2007, and a 30-year sale was at the greatest yield since 2001.
Treasury Secretary Scott Bessent invoked the buyback program last year as part of the department's "big toolkit we can roll out" if needed to address dislocation in the Treasuries market, according to the Financial Post. Bessent has repeatedly said his key financial-market benchmark is 10-year yields. In November, he said: "my job is to be the nation's top bond salesman. And Treasury yields are a strong barometer for measuring success in this endeavour." Livemint reports that Bessent said he's prepared to expand buybacks of costlier debt, though he refrained from further signals on Monday.
Market participants weigh in
The Financial Post quotes Jack McIntyre, a portfolio manager at Brandywine Global Investment Management, who said the administration needs a win and "maybe that comes in the form of artificially trying to keep long Treasury rates contained." John Briggs, head of U.S. rates strategy at Natixis North America, said if yields go too far, the Treasury will "try and fight it."
Traders are now preparing for a US$16 billion auction of new 20-year bonds, as noted by the Financial Post.
The buyback move revives concerns about fiscal policy, according to Livemint, which notes the US Treasury's action came after yields on long-dated securities hit the highest levels in years.
Gold surges as debasement trade returns
The Treasury's intervention has also rippled through gold markets. Gold traded near a three-month high, nearing $4,680 an ounce, after adding more than 7% in four sessions of gains since the Treasury ramped up buybacks of long-dated government debt, as reported by Livemint. The unexpected move has revived concerns about rising borrowing costs and exerted downward pressure on the dollar, making gold cheaper for many buyers.
The recent efforts at controlling debt costs have renewed worries about inflation and dollar weakness, marking a return to the so-called debasement theme that helped drive gold's blistering rally in 2025, according to Livemint. Gold's rebound has taken the metal above the crucial 200-day moving average, often viewed as a bullish technical signal. In a sign of wider participation, gold-backed ETFs tracked by Bloomberg added more than 28 tons last week, the most since January.
At 7:45 a.m. Singapore time, gold climbed 0.5% to $4,676.92 an ounce, silver rose 0.9% to $69.53, and platinum and palladium advanced. The Bloomberg Dollar Spot Index fell marginally, as per Livemint.
George Efstathopoulos, a portfolio manager at Fidelity Holdings Ltd., told Bloomberg News that he doubled his fund's bullion holdings over the past three weeks, citing uncertainty over Fed policy as a catalyst. Justin Lin, an analyst at Global X ETFs, said he sees scope for macro money to pivot quite heavily into precious metals on the back of the currency debasement narrative. Christopher Wong, a strategist at Oversea-Chinese Banking Corp., said the inflows show an encouraging trend of broadening investor participation and that the rally has room to run.
Broader market context
Investors will also be looking for Kevin Warsh to clarify his views on how the Federal Reserve should react to stubborn inflation when the central bank chair speaks Friday at the annual Jackson Hole gathering, as reported by Livemint.
The safe-haven attributes of gold are also being tested by growing global trade tensions. The US has threatened economic punishment against any country doing business with Iran as part of a campaign to isolate the Islamic Republic. The world's largest economy also is spiraling into a trade war with Canada after talks broke down last week, according to the same report.
According to Livemint, analysts at Goldman Sachs wrote that large volume of outstanding options will likely amplify volatility in gold going forward, and total call open interest on SPDR Gold Shares has surged to the highest level since March. A blistering rally earlier sent gold to a record just below US$5,600 an ounce.
Ray Dalio, billionaire investor and founder of Bridgewater Associates, said investors should reduce their bond holdings and put as much as 15 per cent of their money in gold to hedge against the risk of a U.S. debt crisis, as carried by the Livermint report.