Treasury Secretary Scott Bessent Plans to Step Up Buybacks of Longer-Dated Bonds to Lower Long-Term Yields
Treasury Secretary Scott Bessent announced plans to increase buybacks of longer-dated bonds, a move intended to alleviate market pressure on 30-year yields which have reached near two-decade highs. This strategy, referred to as a "Treasury twist," involves replacing a portion of the government's long-term debt with short-term bills to compress the market supply of long-term bonds. Independent research firm Citrini Research argues that this move signals a new "Treasury-Fed Accord" between the Treasury and the Federal Reserve. Under this framework, the Fed will continue to shrink its balance sheet while commercial banks expand their own, absorbing more short-term bills. The administration announced that this coordination aims to improve fiscal sustainability and stimulate economic growth by loosening liquidity requirements for banks. While the move is expected to provide short-term support for 30-year bonds, Citrini Research maintains a bearish stance on long-term Treasuries in the long term, noting that lower yields could eventually intensify inflationary pressures.