The Treasury’s expanded buyback program revives Operation Twist concerns, pressuring the USD while long-term yield impact remains limited.
The US Dollar extended losses as the Treasury’s plan to expand Liquidity Support Buyback Operations pushed EUR/USD above 1.17 for the first time since May. The move stabilized after an initial 0.8% trade-weighted decline but kept the greenback under pressure.
Analysts compare the program to the Fed’s 2011-12 Operation Twist, which swapped USD 667 billion in short-term bonds for longer-dated securities at USD 44.5 billion monthly. The earlier effort lowered 10-year Treasury yields by an estimated 23 basis points, though current buybacks may have a modest impact.
The Treasury’s willingness to tolerate a weaker Dollar to contain rates introduces structural risks for USD, despite limited near-term yield effects.