Treasury's Bond Intervention Unlikely to Bring Sustainable Relief

Dow Jones
08/21

1301 ET - The U.S. intervention in bond markets could backfire, as the Treasury will need to issue more short-dated debt to finance long-term buybacks, First Eagle's Idanna Appio writes. The strategy entails "more interest-rate risk for the Treasury down the road when maturing obligations must be refinanced at higher prevailing rates," she says. "This rollover risk is particularly problematic in light of today's fiscal situation with a large primary deficit and high federal debt." Appio says the announced increasing buybacks still represent a small fraction of Treasury markets, making a sustainable relief less likely.

 

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