The Treasury keeps a cash account at the Federal Reserve. It holds about $950 billion. And right now, the government is deciding whether to dip into it.
Word from two senior Treasury officials is that the department may draw on that account to help pay for a bigger bond buyback program. The move could change how the market reads the government's latest financial maneuvers.
Last week, the Treasury doubled the size of its buyback for long-dated off-the-run securities, which are older bonds that are no longer the most recently issued. The minimum purchase amount increased to $4 billion per operation, up from $2 billion.
Treasury Secretary Scott Bessent told CNBC the buybacks could get even bigger than that new $4 billion floor. He called the operation a "Treasury Twist," a nod to the idea of selling short-term bonds to fund purchases of longer-term ones.
The first operation under the new plan is scheduled for Sept. 9. The announcement came nearly three weeks before that, and the Treasury also laid out its full-quarter plan on Aug. 19. Officials say no official auction schedules were changed.
Markets move every day, and most of it never reaches you in time. Get the free Market Briefs daily newsletter and stay ahead of it.
Here is where the General Account comes in. The Treasury General Account, known as the TGA, is essentially the government's checking account at the Federal Reserve, funded by tax receipts.
The previous administration's target was $550 billion to $600 billion. That extra cushion gives the Treasury options it didn't have before.
Using the TGA could shift market skepticism about the buyback plan. After the initial rally, bonds reversed and yields rose because traders doubted the plan would work and questioned whether the Treasury had the resources to pull it off.
The catch: the TGA would be used only for the off-the-run securities purchases, not for anything else. And officials declined to say how much might be used or when an announcement would come.
If the Treasury does tap the account, it could help calm the bond market. Even a small draw, or just the acknowledgment that the money is available, could influence bond yields. And using the TGA would ease any worry that the Federal Reserve might be asked to help, since this account is not part of the Fed's monetary toolkit.
There is a trade-off. Reducing the TGA leaves less cash on hand for a debt ceiling impasse, though officials do not expect the next limit to be hit until winter or early spring. If the Treasury wants to keep the account near $1 trillion, it would need to sell additional bonds to refill it later.
Bessent said the goal is to get the market to "focus on the fundamentals and not trade the headlines during … a quiet period in a thin market. So we are trying to keep the market in equilibrium."
Officials say it's too early to judge how the market will react, since the first auction hasn't happened yet. The Treasury also sees the deficit improving as new tariffs replace the court-ordered refunds, bringing back tariff revenue. Top officials plan to meet soon to develop measures to improve the fiscal situation.
For everyday investors, the bottom line is about stability. When the Treasury can back its plans with real money, the bond market tends to calm down. A calmer bond market means less turbulence for your portfolio, especially if you hold bond funds or rely on fixed-income investments for income.
The money story behind the headlines is usually the part that matters. Join Market Briefs free and get it every morning.
