The U.S. Treasury Department said on Wednesday it would double the size of liquidity support buyback operations for longer-dated nominal coupon securities from US$2 billion (HK$15.6 billion) to at least US$4 billion per operation.
The change, which will apply to the 10-year to 20-year sector and the 20-year to 30-year sector, will be effective September 9 through November 4, it said in a statement.
The move was announced a day after a major bond selloff pushed the 30-year Treasury yield to its highest level since 2007 amid worries of an imminent escalation in the U.S.-Israeli war with Iran and rising concerns over a deteriorating U.S. fiscal picture as total public debt outstanding nears the US$40 trillion mark.
Yields rose despite a previously scheduled US$2 billion buyback operation of 20-year and 30-year bonds on Tuesday.
The 30-year yields had subsided somewhat on Wednesday from Tuesday's 19-year high of 5.34 percent, and the Treasury's announcement drove them down further, to as low as 5.187 percent, marking the largest daily drop in yields since late June.
"This increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants, as evidenced by the significant volume of high-quality offers Treasury routinely receives in longer-dated buyback operations," the Treasury said in a statement.
The Treasury has for several years engaged in scheduled purchases of older-vintage securities prior to their maturity dates to provide liquidity support for those so-called off-the-run bills, notes and bonds.
Tuesday's buyback of 20- to 30-year bonds included purchases of US$1 billion of a bond maturing in 2048 and another US$1 billion of two bonds maturing in 2051, Treasury records show. Investors had offered nearly US$20 billion of bonds to Treasury to repurchase.
The next currently scheduled buyback operation for 20- and 30-year bonds is set for September 24, with a 10- to 20-year buyback scheduled on September 10.
The Treasury said it would publish an updated tentative buyback schedule at a later date.
Reuters
