Treasury Secretary Scott Bessent is considering utilizing the nearly $1 trillion Treasury General Account to support expanded U.S. bond buybacks amid rising long-term borrowing costs.
U.S. Treasury Secretary Scott Bessent is contemplating the use of the department’s nearly $1 trillion cash reserve to facilitate expanded purchases of government bonds. This strategy could provide the Treasury with an additional tool to manage increasing long-term borrowing costs.
According to two senior Treasury officials, the Treasury General Account (TGA), which currently holds approximately $950 billion, may be tapped to finance bond buybacks. The officials noted that this account is available for purchasing older, less frequently traded Treasury securities. However, they did not specify the amount that could be deployed or the timeline for such actions.
The potential use of the TGA comes as the Treasury has broadened its bond-buyback program in response to a significant rise in long-term government borrowing costs. Last week, Bessent announced plans to increase purchases of longer-dated securities, with individual operations potentially exceeding $4 billion.
The Treasury is set to commence larger buybacks of 10- to 30-year bonds on September 10. This strategy aims to enhance liquidity in the Treasury market and address elevated yields, which have escalated the government’s cost of servicing its debt.
Utilizing the TGA would enable the Treasury to purchase bonds without needing to issue additional short-term debt to raise the necessary cash for these transactions. The TGA serves as the federal government’s primary operating account at the Federal Reserve and is used to manage government receipts and payments.
The prospect of using this cash reserve briefly led to a decline in Treasury yields on Monday. The 10-year Treasury yield fell to approximately 4.70%, while the 30-year yield hovered around 5.24%, as investors evaluated the possibility of further Treasury intervention in the bond market.
This initiative occurs against a backdrop of escalating U.S. government debt and growing concerns regarding the sustainability of higher long-term interest rates. The Treasury has been working to support market liquidity while adhering to its regular debt-issuance schedule.
Bessent confirmed that the Treasury would maintain its planned auction schedule even as it ramps up bond buybacks. However, the department has not definitively stated whether the TGA will be employed to finance these purchases.
This strategy has garnered skepticism from some market participants. Critics argue that the scale of the buybacks remains modest compared to the vast size of the Treasury market and the amount of new debt the government is required to issue. Additionally, there are concerns that utilizing a large cash reserve for bond purchases could create uncertainty regarding the Treasury’s traditional approach to debt management.
The Treasury’s actions are being closely monitored in advance of the Federal Reserve’s annual economic symposium in Jackson Hole, where investors are seeking signals about the future trajectory of interest rates.
According to The American Bazaar, the developments surrounding the Treasury’s bond-buyback strategy and the potential use of the TGA will be pivotal in shaping market responses in the coming weeks.