Treasury’s Long‑Term Buybacks Tighten Yields, Test the Fed
US Treasury raised its long‑term debt buyback cap from $2B to at least $4B to curb a recent yield sell‑off, a move aimed at boosting market liquidity but potentially increasing inflation risk and complicating Fed policy under Chairman Kevin Warsh. The buybacks are not QE and would be funded by issuing more short‑term bills, a shift that could alter the debt profile and raise sensitivity of financing costs to rate moves. The intervention helped reverse part of the sell‑off, with the 10‑year yield retreating and the dollar dipping, even as TBAC cautions against using buybacks to change debt composition. Markets remain wary ahead of Jackson Hole as policymakers grapple with aligning Treasury actions and Fed policy.