US Treasury Signals More Action on Yields, May Boost Buybacks Past $4 Billion

U.S. Treasury Secretary Janet Yellen indicated that the department may take additional steps to stabilize rising long-term Treasury yields, suggesting the possibility of increasing debt buybacks beyond the current $4 billion per auction limit. This comes after the Treasury announced it would double the buyback limit for 10- to 30-year bonds to at least $4 billion per auction, starting September 9.

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We have a lot of policy tools at our disposal.

In an interview with CNBC, Yellen emphasized that the goal of these buybacks is to improve market liquidity, not to target specific yield levels. She noted that the liquidity in the 30-year Treasury market has been particularly poor recently. Yellen attributed market pressure to the typically slower August trading period combined with significant corporate bond issuance for AI infrastructure investments.

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We are going to increase the size of the buybacks, and it could be in excess of $4 billion per auction.

The Treasury Secretary also addressed concerns about the national debt, which has surpassed $40 trillion for the first time. Yellen downplayed the significance of the absolute number, stating that the U.S. can overcome this challenge through economic growth. She suggested that the U.S. fiscal deficit may have already peaked, citing factors like stable tariff revenues and the temporary impact of tariff refunds from a Supreme Court ruling.

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The liquidity in the 30-year market is very poor.

Furthermore, Yellen committed to developing fiscal consolidation plans with Russell Vought, director of the Office of Management and Budget, under President Trump's directive. She believes these efforts could yield hundreds of billions of dollars in savings.

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There is no special significance to the number $40 trillion. We can grow out of this problem.