US Treasury Secretary Scott Bessent made a fresh attempt to rein in long-term borrowing costs from multi-year highs, sending Treasury yields and the dollar down.

Just two weeks after releasing its planned schedule for buybacks this quarter, the Treasury Department on Wednesday said it's "increasing, by at least double, the size of liquidity support buyback operations" for securities dated from the 10-year to the 30-year sector. 

The new plan drove yields on the longest bond lower by nearly 10 basis points to 5.18%, pulling them back from their highest levels since 2007. The dollar fell by the most in three months.

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Elevated yield levels have kept US mortgage and other borrowing costs high, posing a headwind for economic growth and a potential problem for President Donald Trump and his fellow Republicans ahead of the November midterm elections. They've also driven up the Treasury's own borrowing costs, worsening what was already a steep trajectory for government debt.

"This administration needs a win and maybe that comes in the form of artificially trying to keep long Treasury rates contained," said Jack McIntyre, a portfolio manager at Brandywine Global Investment Management. "They have to try something. Sentiment around the long-end globally is about as bearish as I have seen in a very long time."

How long lasting the impact is remains to be seen. "What really gets long rates lower is a slowing economy or resolution on the Iran conflict, and I'm not sure we're there yet," McIntyre said.

Bessent last year invoked the buyback program as part of the department's "big toolkit we can roll out" if needed to address dislocation in the Treasuries market. He's also repeatedly said, since taking office, that his key financial-market benchmark is 10-year yields. Last November, he said, "my job is to be the nation's top bond salesman — and Treasury yields are a strong barometer for measuring success in this endeavor."

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Officials made the announcement as long-dated government bond yields around the globe rose to significant levels this week — with the US 30-year trading at its highest since 2007. Traders are also preparing for a $16 billion auction of new 20-year bonds. A 10-year auction last week drew the highest financing cost at that tenor since 2007, while a 30-year sale a day later was at the greatest yield since 2001.

"If yields go too far, Treasury will try and fight it — and now we know where some pain points are," said John Briggs, head of US rates strategy at Natixis North America.

The ramped-up buybacks will begin Sept. 9, the Treasury said. Two weeks ago, the department said it anticipated purchases of up to $38 billion of older securities, known as off-the-runs, for "liquidity support." It's tentative calendar for Sept. 9 through Nov. 4 indicated up to $14 billion total buybacks of 10-year to 30-year Treasuries. At least doubling that total would suggest an extra $14 billion or more.

Treasury officials reintroduced the buyback program in 2023 — an initiative originally conceived more than two decades ago, back when the government enjoyed budget surpluses and was repurchasing and retiring higher-cost securities. The new program was aimed in part and boosting liquidity in the market, as traders typically prefer to hold the current benchmark of given tenors, leaving older ones less easy — and more expensive — to trade.

"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 its statement.

The buyback gambit is the latest in a series of interventions by Bessent — who came to office after a decades-long hedge-fund career — that some analysts say are designed to actively manage down borrowing costs ahead of the November midterm elections.

At the end of last month, Bessent engaged in the first US-Japan coordinated yen purchases since 1998, viewed by strategists as aimed at heading off large-scale sales by Tokyo of Japanese holdings of Treasuries

Days later, the Treasury's quarterly debt-issuance policy statement featured a tweak in forward guidance that opened the door to a potential reduction of sales of long-term securities.

Bessent has also been taking to the airwaves and social media to defend the new communications strategy of Federal Reserve Chairman Kevin Warsh, who caused yields to surge after last month's meeting when he failed to explain how — or when — the central bank may act to bring down inflation.

Buyback enthusiasm

The latest buyback was conducted Tuesday, when the Treasury offered $2 billion for securities set to mature in the 2046-56 range. The operation was 10 times oversubscribed, showcasing how investors' enthusiasm for the program.

It also comes just days after the Treasury paid out about $85 billion in interest to bondholders, the largest sum in records kept by Bloomberg. 

Wednesday's statement didn't indicate how the operations would be paid for, but the Treasury typically relies on issuance of bills, which mature in up to a year, for its fluctuating funding needs. If officials are in effect replacing longer-dated debt with bills, Bessent's latest maneuver amounts to a Treasury Department version of something the Federal Reserve has done more than once over the decades: an "Operation Twist."

The Fed's version featured replacing short-dated Treasuries with longer-dated ones in the central bank's portfolio — aimed at bringing down longer-term borrowing costs and boosting economic growth.

"Operation twist is here," Deutsche Bank AG strategists wrote in a note. "Treasury would have to issue more treasury bills to finance the removal of duration from the market." They added that it's effectively a "soft-form financial repression."