US Treasury Secretary Scott Bessent said on Thursday that the Treasury Department could further expand its buyback program for long-dated US government bonds, with actual repurchase amounts potentially exceeding the previously announced $4 billion per auction period. Bessent stated that the Treasury aims to improve liquidity in the long-term bond market through increased buybacks, while signaling to the market that current long-term yield levels do not fully reflect the fundamentals of the US economy.
The Treasury Department announced on Wednesday that it would double the size of its long-dated bond buyback program to $4 billion per auction, up from the original $2 billion. Following the announcement, long-term bond prices rose quickly, and yields pulled back noticeably. In an interview on Thursday, Bessent said the Treasury would continue to increase the scale of buybacks, specifically noting that "the repurchase amount per auction could exceed $4 billion." He indicated that the Treasury plans to play a more active role in the long-dated bond market, which has seen yields climb sharply in recent months, in order to improve trading conditions.
Following Bessent's remarks, bond yields eased slightly, although much of the decline seen after Wednesday's expansion announcement had already been retraced. The 30-year Treasury yield was last trading around 5.235%, after recently reaching levels not seen since before the 2008 global financial crisis. Bessent acknowledged that the long end of the yield curve is under considerable pressure, and he believes the current level of long-term yields does not align with US economic fundamentals. He said the Treasury possesses a "vast toolkit of policy measures" and will decide on further actions based on market conditions. He also pointed out that liquidity in the 30-year Treasury market is currently "very poor," which further underscores the need for the Treasury to act.
The US Treasury market is typically one of the largest and most liquid bond markets in the world, so the noticeable deterioration in long-end liquidity has drawn attention from policymakers. The recent sustained rise in long-term yields is being driven by multiple factors. On one hand, the expanding US government debt and fiscal deficit have heightened market concerns about Treasury supply and fiscal sustainability. On the other hand, the boom in artificial intelligence infrastructure investment has spurred corporations to issue large volumes of corporate bonds, competing with Treasuries for investor capital. Additionally, rising sovereign bond yields in other major economies such as Japan, along with an increasing term premium on US bonds, have further pushed up long-term US financing costs. The term premium refers to the extra compensation investors demand for holding long-dated bonds.
Data released by the Treasury Department on Wednesday showed that US public debt surpassed $40 trillion for the first time this week. Bessent downplayed the significance of this symbolic milestone, saying, "There is nothing magical about the $40 trillion figure itself; we can address this issue gradually through economic growth." He further noted that the message the US sends to allies and trading partners is that driving global economic growth is a key avenue for tackling the substantial debt burden.
Meanwhile, Bessent revealed that he will meet with Russell Vought, Director of the Office of Management and Budget, to discuss "fiscal consolidation." With US debt surpassing $40 trillion and long-term financing costs remaining elevated, how to control the fiscal deficit, improve the debt structure, and reduce interest burdens is becoming a major fiscal challenge facing the US government.
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