U.S. Treasury Secretary Takes Action to Expand Debt Buybacks, Bets on Active Intervention to Depress Long-Term Bond Yields

BlockBeats News, August 20th. On Wednesday, the U.S. Treasury Department announced an expansion of the long-term bond repurchase size, triggering market attention. This move was seen by Wall Street as Treasury Secretary Yellen's attempt to directly alleviate the pressure on long-term Treasury yields and reduce the government's financing costs.

The Treasury Department stated that from September 9th to November 4th, the single-day limit for repurchasing U.S. Treasury bonds with maturities of 10 to 30 years would be at least doubled, from $20 billion to $40 billion. After the announcement, the long-term U.S. Treasury bond yields rapidly declined, with the 30-year bond yield falling by nearly 10 basis points, and U.S. stocks rising simultaneously.

The market believes that although this operation is officially positioned as a technical measure to enhance bond market liquidity, its core objective is to restrain the continuous rise in long-term yields. According to calculations by BNP Paribas, at the current pace, the Treasury Department may repurchase around $128 billion of relevant maturity Treasury bonds in a year, equivalent to about 30% of the issuance of those maturity bonds, but only accounting for approximately 2.4% of the market's outstanding debt.

Jim Bianco, the founder of the U.S. research firm Bianco Research, stated, "In the past, the market often said 'when the Fed starts to panic, bond traders can stop panicking,' but now it should be changed to 'when Yellen starts to panic, bond traders can stop panicking.'

Recently, the yield on the U.S. 30-year Treasury bond surpassed 5.3%, reaching a new high in nearly 20 years, and the average mortgage rate approached 7% once again. At the same time, the total U.S. federal debt exceeded $40 trillion, with the fiscal deficit still accounting for about 6% of GDP, and the market continues to worry about government debt pressure.

Yellen, a former hedge fund manager, has taken several non-traditional market operations since taking office, including adjusting debt issuance strategies, promoting regulatory reforms, and participating in foreign exchange market interventions. Some market participants believe that her policy style exhibits a distinct 'hedge fund-style' macro trading mindset.

However, some analysts have warned that bond repurchases cannot solve the long-term U.S. fiscal deficit and debt growth issues. Brookings Institution researcher Robin Brooks stated that this action seems more like 'manipulating the yield curve' rather than addressing the root of the debt issue.

The current focus of the market is on whether the Treasury Department's proactive intervention can sustainably lower U.S. Treasury bond yields or merely provide short-term market relief. Analysts point out that if fiscal spending and debt growth issues are not improved, relying solely on repurchase operations will be difficult to permanently change the trend of the U.S. bond market.