- Key insight: Treasury Secretary Scott Bessent said the agency is buying older, less-liquid bonds to help investors move into newer Treasury securities.
- Supporting data: Treasury said Wednesday it would buy up to $6 billion of longer-term debt, but long-term Treasury yields rose nonetheless.
- Forward look: Bessent said the buybacks are intended to push the market toward equilibrium, not influence the equilibrium price of Treasury bonds.
Treasury Secretary Scott Bessent on Tuesday said Treasury buybacks are meant to make older, less-traded government bonds easier to buy and sell, saying they are not intended to mimic the Federal Reserve's quantitative easing program or influence borrowing rates.
Asked about his role as the "chief bond salesman of the United States" and the purpose of Treasury's
"As bonds become older, they become what's called off-the-run; they are less liquid, and bondholders can get less margin for them," Bessent said. "They're less inclined to hold them, the spreads are wider, so we come in and we make a market. We buy those."
The Treasury said Wednesday that it would buy up to $6 billion of older, longer-term Treasury bonds; the agency had
But buying more bonds did not push long-term interest rates down. Instead, yields rose Wednesday, with the 10-year reaching 4.8% and the 30-year moving above 5%.
Bessent during the fireside chat said the purchases are designed to encourage investors holding older Treasury securities to move back into newly issued bonds.
"They have older bonds, and then they re-leverage and buy new bonds," he said, calling it "just a regenerative process."
Bessent also said he wanted the program to counter what he viewed as excessive speculation and uncertainty surrounding Treasury's intentions.
"The other reason I did it was just to level-set the expectations that there was, like, this fever that was building," he said, pointing to his experience in financial markets as a former hedge fund manager.
"When you're speculating, you want to speed things up," he said. "You want to make as much money as you can, as quickly as you can."
He explicitly rejected the characterization of the buybacks as akin to quasi-monetary policy. He said instead, Treasury's role when markets move away from equilibrium is to "push things back towards equilibrium.
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"I'm not doing QE — I don't believe that I can change the equilibrium price [of U.S. Treasury bonds]," Bessent said. "But nothing's ever in equilibrium. You're either moving away from it or you're moving toward it."
Bessent then turned to the broader performance of the Treasury market, arguing that concerns about U.S. creditworthiness are inconsistent with market behavior.
"The U.S. bond market, since the president came in, is the best performing in the world," he said, adding that the global demand for U.S. debt is still strong. "If everyone was worried about the credit of the U.S., you would sell U.S. bonds and buy German bonds, and it's the opposite. We're the best performing."
The yield on long-dated Treasury bonds has
