The Treasury caught investors off-guard by deciding to ramp up its bond purchases-but it will be hard for Secretary Scott Bessent to counter risingyields and falling bond prices unless he overhauls the entire buyback system.
The Treasury has used buybacks since 2024 to take older bonds that weren't actively traded out of circulation, giving investors space to buy newer bonds and thereby improving market liquidity. The operations have been regular and predictable and weren't designed "to mitigate episodes of acute market stress" or change the debt markets structure, the Treasury stated in May 2023.
That changed last week. As bond prices fell sharply, the Treasury announced it would be buying back at least $4 billion in longer-term bonds from Sept. 9 through Nov. 4, up from a previously announced buy of $2 billion. Updates on buybacks are usually given once per quarter and the next announcement was due early November, so this was unexpected. The $2 billion increase applies to each of the Treasury's seven buying operations during the rest of the quarter, amounting to a $14 billion increase.
Treasury, in its Wednesday press release, cited strong market demand and high-quality offers for longer-duration bonds as a rationale. Demand has indeed skyrocketed. Dealers offered to sell about $36 billion in 20-to 30-year bonds to Treasury in an April operation, compared with under $5 billion in a June 2024 operation.
Bessent, in a CNBC interview the next day, went further, saying the Treasury's intent was to get traders to "focus on the fundamentals and not trade the headlines during...a quiet period in a thin market." It suggested the buyback news was in fact an intervention by Bessent to quell bond market angst.
The last change to buybacks was made in July 2025 when the Treasury increased the frequency of buybacks but kept its maximum buyback size at $2 billion for long-duration bonds.
By adhering to a regular and predictable framework, the Treasury over the years has built up goodwill, wrote Steven Zeng, a strategist at Deutsche Bank. That allowed Treasury to fund the U.S. debt at the lowest possible dollar to the taxpayer, in other words kept a thumb on yields or interest paid on the debt.
Bessent's buy back of securities isn't lowering the size of the $40 trillion national debt nor is it changing the amount of money in the financial system. Instead, it simply replaces one security with another as it rearranges the government's own debt profile.
On a weighted-average basis, for all U.S. Treasuries to mature it will take 70 months, according to the agency estimate as of the end of July. Increased longer-term buybacks can trim the maturity, meaning the government is more dependent on shorter-duration debt to fund its deficit pending. That would be helpful for the government if rates moderate, but could end up costing it more money in a rising-rate environment.
But the $14 billion in additional buybacks through November will only modestly change this debt profile.
The Treasury will have to buy back roughly $100 billion in 30-year notes financed with Treasury bills issuance to reduce maturity by one month, according to an estimate by Deutsche Bank.
Bessent, told CNBC on Thursday, that buyback operations could be even larger than the new higher minimum. But, in a press conference on Monday, he refused to reaffirm the future increase and said "we haven't bought a single bond yet. The next time we have an operation is Sept. 9, so we will see on September ninth."
Buying back long-term bonds should reduce yields on them. But Fed research suggests that a one-time purchase of 10-year debt equivalent to 1% of gross domestic product-or more than $300 billion-would lower the 10-year yield by just 0.1 percentage points.
The bottom line is that the Treasury needs much more firepower to make buybacks have a meaningful impact on the borrowing costs. And at the same time, Treasury would have to abandon this principle that buybacks aren't going to be used to change the debt market structure.