US Treasury Begins $50,000,000,000 Liquidity Injection As Trillion-Dollar Bond Market Witnesses Weak Demand

The Treasury Department is beginning to buy tens of billions of dollars in US bonds in a push to bolster the market.

In a series of announcements, the department details its $50 billion buyback operation, which started on August 7th and will last until October 31st.

The agency is looking to buy both short and long-duration bonds in an effort to boost liquidity and mitigate concerns about fragility and volatility within the $25 trillion US Treasury market.

The buybacks are designed to encourage dealers by offering a regular and predictable buyer.

As for where the funds for the buyback will come from, the Treasury typically uses cash from its reserves or sells new bonds to raise cash, which in turn creates new debt.

Recent Treasury auctions have witnessed weaker than expected demand, including from foreign buyers, forcing the government to offer a higher interest rate than expected.

One such auction on August 7th saw poor demand, as reported by Bloomberg, as volatile swings in yields underscore investors’ concerns on whether the US is heading for or is already in a recession.

 

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