Treasury Takes Less Than Expected at Buyback, Pushing Up Yields

(Bloomberg) -- The US government repurchased fewer 10- to 20-year securities than the maximum amount it outlined under Treasury Secretary Scott Bessent's expanded buyback program, driving US government debt yields higher.

The Treasury Department bought $5.19 billion worth of the debt on Thursday, short of the $6 billion maximum amount it had announced on Wednesday. The yield on 10-year notes extended an earlier rise after the operation, up 11 basis points to 4.95%.

Market participants presented the Treasury with $10.5 billion in offers at Thursday's operation. While the department is not obliged to buy the maximum amount, it's only the third time officials opted against doing so for buybacks targeting longer-dated debt. There have been 53 such operations since the program was reintroduced in 2024.

"This signals that Treasury was more selective than they usually are in the space," said Molly Brooks, a strategist at TD Securities. "If Treasury wants to match market expectations and fill the entire buyback amount to keep long-end rates lower, they may need to accept less competitive bids in future buyback operations."

Thursday's purchases were under increased scrutiny because it was the first since Bessent's unexpected expansion of the long-dated buybacks program last month.

A mid-August announcement that the department would "at least double" the size of operations previously penciled in at $2 billion each took investors by surprise, coming just weeks after the Treasury's typical quarterly schedule release.

It has since fanned chatter of a new, more activist style of US debt management that contrasts with the department's long-held mantra of being "regular and predictable."