The U.S. Treasury is ramping up its bond buyback program. Secretary Scott Bessent told CNBC on Thursday that the plan could top the $4 billion the department announced earlier in the week. That came after the Treasury announced it would double the $2 billion it had previously set aside for repurchasing longer-dated bonds.
Bessent said the department will "make a market" in longer-dated securities where yields have been climbing. He pointed to "very poor" liquidity in the 30-year bond as a reason for the move.
The 10-year yield briefly dipped during his remarks, then rose about 5 basis points to 4.704%. A basis point is one-hundredth of a percentage point.
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The Treasury's buyback program, which involves repurchasing outstanding bonds, is a tool to improve liquidity and stabilize prices. By stepping in as a buyer, the government can help smooth trading in times of stress. This move comes as the 30-year yield reached levels not seen since the 2008 financial crisis, reflecting investor concerns about inflation, deficits, and the supply of government debt.
Several forces are pushing yields higher. The government's growing debt load, now past $40 trillion, is one. Competition from corporate debt tied to artificial intelligence is another. Higher yields from other countries, like Japan, and rising term premiums, the extra compensation investors demand for holding longer-term bonds, also play a role.
Bessent said the buyback decision wasn't about the current yield levels. He wants fundamentals to drive the market, not headlines. He declined to give a specific buyback amount, saying it depends on market conditions. "We'll see what the conditions are, and you know we will analyze them," he said. "All we're trying to do is get people to focus on the fundamentals and not trade during a quiet period in a thin market."
Bessent said he plans to meet with Russell Vought, who leads the Office of Management and Budget, to talk about "fiscal consolidation," which is a fancy way of saying getting the budget under control. But he downplayed the $40 trillion debt figure itself. "There's nothing magic about the 40 trillion number," he said. "We can grow our way out of that." He added that the key to tackling the debt burden lies in global growth.
For everyday investors, the takeaway is that the government is watching the bond market closely. When the Treasury steps in, it can affect everything from mortgage rates to retirement accounts. Bessent said the department has a "big toolkit" and isn't afraid to use it. That's worth paying attention to, even if the daily moves feel like noise.
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