US Treasury's $6 Billion Bond Buyback: Why Markets Didn't Buy the Hype

Mitrade Team
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Source: DepositPhotos

The US Treasury walked into the bond market on Wednesday with $6 billion. It was triple its usual size, and the biggest such offer in years. The market took one look and sold.

While yields were supposed to fall, they rose, because within hours, one bond manager had shrunk the whole plan down to a single sentence.

The Bond Market Was Not Impressed

Citing Mark Spindel, chief investment officer at Potomac River Capital, CNBC referred to 2008, when a Treasury secretary needed an act of Congress to turn markets around. Scott Bessent has no such firepower.

“Hank Paulson’s bazooka this is not,” said Spindel.

The treasury’s tool is a buyback, just as a company would normally repurchase its own shares. For the treasury, however, they use cash to lift older, hard-to-trade bonds off dealers’ books.

It pays down none of the $40 trillion national debt. It is not quantitative easing, where a central bank creates money to buy bonds. Washington funds it by selling more short-term IOUs. As that is the entire machine, the size was the story.

On August 19, Bessent promised to at least double the standard $2 billion operation. Traders began whispering about $8 billion, even $10 billion. He came back with $6 billion.

The Market Called the Bluff

The 10-year Treasury note hit 4.84%. The 30-year added five basis points to 5.307%, back through a line traders watch closely. A basis point is one hundredth of a percentage point.

Bitcoin, Gold, and US Treasuries Performances. Source: TradingViewBitcoin, Gold, and US Treasuries Performances. Source: TradingView

Hard assets stayed cold, with the gold sitting near $4,407 an ounce. Bitcoin (BTC) dipped toward $78,000 as yields spiked, then crawled back to $79,084. Three weeks ago, the same announcement sent both flying.

Washington announced it was buying its own debt, and its debt got more expensive. Long-term bonds are already limping out of their worst decade since 1803.


BeInCrypto saw it coming. A week ago it reported Pantera Capital’s Dan Morehead calling the plan a bluff that had already backfired.

“Governments defending prices against fundamentals always lose. The only variable is how much they spend before conceding,” said Stanley Druckenmiller, who once mentored Bessent.

Thursday’s buying window lasts 20 minutes and shuts at 2 p.m. ET. If yields are still climbing once the $6 billion is spent, Druckenmiller’s line stops being an opinion.


Disclaimer: The content presented above, whether from a third party or not, is considered as general advice only. CFD trading involves significant risk of loss. Past performance does not guarantee future results. This article serves informational purposes only and does not constitute financial advice. Consider your risk tolerance before trading.

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