The Treasury has not bought a single bond under the buyback expansion the bond market has spent a week arguing about.
On August 19 it announced that its buyback operations in the ten-to-thirty-year part of the curve, capped at $2 billion apiece, would rise to at least $4 billion. The change takes effect September 9. The same morning, Treasury disclosed that the public debt had crossed $40 trillion for the first time. The 30-year yield, which days earlier had hit its highest level since 2007, fell as low as 5.18 percent and closed down nine basis points at 5.196. By the next afternoon it was back above 5.27, where it had been just before anyone said anything.
Nothing was bought in between. What moved was a paragraph. Size explains part of that. Seven long-end operations remain on Treasury's published schedule between September 9 and November 4, and at the new ceiling they come to $28 billion — a ceiling nobody has to reach, because the minimum purchase amount on each operation is zero dollars. In a single week this month, Treasury auctioned $42 billion of ten-year notes and $25 billion of thirty-year bonds. The buying is smaller than one week of the selling.
Treasury Secretary Scott Bessent has not been coy about this. Asked why the department moved, he said "Part of it is signalling here," and that the aim was to show Treasury's view that yields were not reflecting the fundamentals. So $28 billion is probably the wrong number. In the same remarks he called the $4 billion figure a floor rather than a strict limit, and Treasury officials told CNBC the department could fund purchases out of its $935 billion general account. Read that way the program is not small at all. It is unspecified, which is a different thing from small, and which looks like the reason a paragraph was worth nine basis points for a day.
That is what Monday's Wall Street Journal column urging Bessent to stop was really about. Not four billion against two, but whether the Treasury gets a view on the price of its own debt. All of it — the rally, the round trip, the column, the denials — happened in a market where the program existed only as a sentence. The sentence has been priced. The buying starts September 9, and by Treasury's own schedule, the buying is the small part.
What moved was a paragraph.
