Treasury’s plan to double liquidity-support buyback sizes to 4 billion Dollars drives long-end yields lower, boosting equities ahead of September start.
The Dow Jones Industrial Average rose over 230 points, or 0.44%, to near 53,600 on Wednesday, driven by a Treasury Department announcement to double the maximum size of its liquidity-support buyback operations in longer-dated coupons from 2 billion Dollars to at least 4 billion Dollars per operation. The move pushed long-end yields sharply lower, with the 30-year bond yield falling more than nine basis points to near 5.19% and the 10-year note shedding over six basis points to around 4.65%.
The larger operations, however, do not begin until September 9 and will run only through November 4, with no additional bonds purchased yet. The 30-year yield had reached its highest level since June 2007 on Tuesday, reflecting a prolonged buyers’ strike in the sector since late June. The market reaction underscores the thin demand for long-dated debt rather than a revival in buying interest.
The Treasury’s plan involves repurchasing long-dated coupon paper while refunding the difference at the front of the yield curve, effectively rearranging the maturity schedule without reducing overall debt levels.