US Treasury Plans Up to $6B in Additional Long-Dated Bond Buybacks; 30-Year Yield Nears 5.4%

The U.S. Department of the Treasury has announced a second round of enhanced long-term bond repurchases, targeting 20- to 30-year Treasury securities. Following the release of the planned maximum size, the 30-year Treasury yield continued to rise, approaching 5.4%.

First Round Fell Short of Expectations

Two weeks ago, the Treasury conducted its first round of enhanced buybacks, also with a maximum target of $6 billion—a figure that fell short of some market participants' expectations. In the end, only $5.2 billion was actually repurchased, with the Treasury citing insufficient competitive bidding.

Ongoing Efforts to Curb Rising Borrowing Costs

In an effort to curb recent increases in borrowing costs, the U.S. Treasury continues to provide liquidity support to the market through buybacks. The first round of enhanced repurchases two weeks ago had limited impact on suppressing long-term bond yields, and the latest action plan has so far failed to reverse the upward trend in long-term yields.

Details of the Second Buyback Operation

On Wednesday, September 23 (Eastern Time), the U.S. Treasury announced another round of long-term Treasury buybacks, purchasing up to $6 billion in face value of 20- to 30-year U.S. government bonds. The repurchased bonds have maturities ranging from November 15, 2046, to August 15, 2056. The operation is scheduled for Thursday, September 24, from 1:40 p.m. to 2:00 p.m. (ET), with settlement on September 25.

This marks the Treasury's second round of enhanced buybacks with a maximum of $6 billion. On September 10, the Treasury conducted its first expanded long-term bond repurchase, also setting a $6 billion maximum target. However, it ultimately repurchased only about $5.2 billion in 10- to 20-year Treasuries, failing to fully utilize the cap. Media reports indicated that, at prevailing market prices, there were insufficient holders willing to sell their bonds.

Market Reaction

After the Treasury announced the buyback plan for Thursday, long-term U.S. Treasury prices continued to decline in the secondary market, with yields moving higher. The 30-year Treasury yield surged toward 5.39%, approaching the approximately 5.40% level reached last week—the highest since 2007.

Broader Economic Context

Since late February, when the U.S. and Israel launched military operations against Iran, rising energy costs have pushed global bond yields higher, intensifying market concerns over inflation and interest rates. The Federal Reserve raised interest rates by 25 basis points at its meeting last week, with all voting members unanimously approving the first rate hike in three years. The dot plot released after the meeting indicated that most policymakers expect one more rate hike this year, reflecting the Fed's determination to contain price pressures.

Treasury Secretary Defends Buyback Program

In response to criticism that expanding the buyback scale constitutes market intervention and fails to address fundamental U.S. fiscal problems, Treasury Secretary Bessent defended the move. In an interview on Monday, he stated that the enhanced buyback was an action taken when he believed market prices had "deviated from equilibrium."

Bessent noted that the change in long-term bond yields since the expanded buyback program was announced has been relatively limited. He pointed out that from August 19, when the Treasury announced the expanded buyback plan, to September 21, the 30-year Treasury yield rose by only about 1 basis point.

IIF Warns: Buybacks Cannot Solve U.S. Debt Problems

Earlier on Wednesday, the Institute of International Finance (IIF), one of the world's largest financial industry associations, warned that attempts to address the fundamental problems of U.S. debt through "financial engineering" would not succeed.

In a report, the IIF stated that interventions such as purchasing securities in the secondary market "may provide temporary relief but cannot resolve the structural factors behind rising debt."

Market Focus Shifts to Execution

The Treasury's previous announcement of an expanded buyback scale came on September 9, when it set a maximum target of $6 billion. Although this was three times the initially announced $2 billion, some market participants had expected a larger figure, given the Treasury's guidance on August 19 that the scale would be "at least doubled"—a theoretically open-ended target.

Ultimately, the Treasury did not fully utilize the $6 billion cap, purchasing only about $5.2 billion in 10- to 20-year Treasuries. Treasury officials attributed this to insufficient competitive bids from the market. In that operation, investors submitted a total of approximately $10.5 billion in bonds to the Treasury.

Given that the first round of enhanced buybacks on September 10 failed to reach its target due to a lack of competitive bids meeting Treasury requirements, market attention has now shifted to whether the second round of $6 billion in buybacks will be fully executed.

This means that, with long-end yields again approaching previous highs, whether the Treasury can attract enough bondholders to sell on Thursday—and whether the $6 billion cap will ultimately be fully utilized—will serve as a key indicator of the actual effectiveness of this buyback tool.

Editor/Stephen