Treasury increases liquidity-support buybacks to at least $4 billion per operation, lowering long-term yields and pressuring the dollar.
The US Treasury announced it will double its liquidity-support buyback operations for longer-dated securities, raising the maximum purchase from $2 billion to at least $4 billion per operation. Treasury Secretary Bessent indicated the move aims to signal that yields do not reflect fundamentals and could exceed $4 billion depending on conditions.
The intervention had a quantitative easing-like effect, lowering long-term yields and easing financial conditions, though it is not classified as QE. Long-term yields typically reflect monetary policy expectations and economic outlook, but this action temporarily suppressed them, leading to broad USD selling.
Market focus now shifts to Federal Reserve official Warsh’s upcoming Jackson Hole speech, which may address the easing financial conditions. Earlier expectations of a non-event have shifted, with potential for market-moving commentary if Warsh does not counter the Treasury’s actions.