More Than $4 Billion Isn't Enough! Yellen Hints at Further U.S. Treasury Buyback Expansion

U.S. Treasury Secretary Janet Yellen said Thursday (the 20th) that the accelerated pace of long-term Treasury buybacks could surpass the previously announced $4 billion, with the actual amount determined by market conditions. Her remarks briefly drove Treasury yields lower, although the effect was fleeting.

On Wednesday, the U.S. Treasury Department announced it would double its long-term Treasury buyback size from the previous $2 billion per operation. Following the announcement, yields dropped sharply. In an interview with CNBC, Yellen further stated that the Treasury would increase the buyback scale, potentially exceeding $4 billion per operation, though she declined to specify an exact figure.

After Yellen’s comments, the 30-year Treasury yield briefly retreated to around 5.235%, having recently risen to levels not seen since before the 2008 global financial crisis. The 10-year Treasury yield also dipped initially but later rose approximately 5 basis points to 4.704%.

Yellen emphasized that the Treasury’s decision to expand buybacks is not aimed at any specific yield level, but rather to ensure markets are driven by economic fundamentals. She noted that with trading currently thin, the Treasury wants investors to focus on fundamentals rather than reacting to every piece of market news.

However, Yellen acknowledged that 30-year Treasury liquidity is "very poor," which is another reason the Treasury is stepping into what is typically a liquid market. She believes current long-term yields do not reflect the underlying strength of the U.S. economy and stressed that the Treasury has substantial policy tools, with expanded buybacks serving as a signal to the market.

Recent rises in Treasury yields have been driven by multiple factors, including swelling U.S. debt and budget deficits, corporate bond issuance fueled by the AI investment boom, rising yields on sovereign bonds such as Japan’s, and investors demanding higher term premiums.

U.S. national debt surpassed $40 trillion this week. Yellen said she will discuss "fiscal consolidation" with White House Office of Management and Budget Director Russell Vought, but emphasized that $40 trillion is not a particularly meaningful number. She added that the U.S. can gradually resolve its debt issues through economic growth, and that global growth is key to addressing massive debt burdens.