- Bessent has built up the TGA to around $950 billion, compared with a stated goal under the Biden administration of around $550 billion to $600 billion.
- The Treasury announced it would double buybacks of off-the-run long-term securities from $2 billion to at least $4 billion.
- Bessent called the operation a 'Treasury Twist' in a CNBC interview, referring to a government operation where long-term Treasurys are bought and paid for with short-term issuance.
- Bonds initially rallied but then retreated, sending yields higher, due to skepticism voiced by many market analysts about the operation's effectiveness.
- Treasury officials stated that the TGA is available for use but did not specify amounts or timing.
- Bessent told reporters that yields would come back down as traders realize the focus is on fiscal consolidation and equilibrium.
- Using the TGA would provide the Treasury with considerable firepower to influence long-term bond yields.
- The announcement of enhanced buybacks came two weeks after the quarterly refunding announcement, when such information would normally be relayed to markets.
- Traders expect the department to switch to issuing more shorter-term bonds, but the yields on those have been rising too.
- Since the end of March, the annual yield on ten-year Treasuries has risen from 4.32% to 4.73%, and the yield on thirty-year Treasuries has risen from 4.9% to 5.28%.
Treasury Secretary Scott Bessent is considering tapping the nearly $1 trillion Treasury General Account (TGA) to fund increased bond buybacks, which could significantly influence long-term bond yields. The Treasury plans to double its buybacks of off-the-run securities from $2 billion to at least $4 billion.
However, skepticism is growing among market analysts regarding the effectiveness of this 'Treasury Twist' strategy. Following the announcement, bond yields have risen, indicating a retreat from an initial rally. Analysts question whether the Treasury's resources are sufficient to support such operations, as Bessent has built up the TGA to around $950 billion, exceeding the Biden administration's goal of $550 billion to $600 billion.1
Bessent's approach is reminiscent of past financial maneuvers, notably his involvement in the 1992 currency crisis with George Soros, where he successfully bet against the pound. Unlike that situation, Bessent is signaling a desire for lower borrowing costs rather than taking a firm stance. Since March, the yield on ten-year Treasuries has increased from 4.32% to 4.73%, while thirty-year Treasuries have risen from 4.9% to 5.28%.
The officials have not disclosed how much of the TGA will be utilized or when an announcement might occur, but they affirm that the funds are available for this purpose.
“The Treasury's buyback plan is small relative to the $1.8 trillion deficit in the first ten months of fiscal 2026, and analysts at ING likened it to 'rearranging deck chairs on the Titanic.' Bessent's past bet against the pound with George Soros netted about $1 billion, but now he faces a different challenge.”
CNBC
