Treasury’s $10B buyback marks largest in U.S. history amid bond volatility

- US Treasury Conducts $10 Billion Bond Buyback - Aims to Stabilize Bond Market Liquidity and Reduce Volatility [Unblock Media] The US Treasury executed a $10 billion government bond buyback on June 5, marking the largest bond buyback in history. This move is interpreted as an attempt to stabilize liquidity and ease volatility in the bond market amid increasing economic uncertainty. According to official documents, the Treasury targeted off-the-run Treasuries for the buyback. This mechanism is similar to what the Treasury used in the early 2000s when managing its bond portfolio during a budget surplus. The US economy is facing persistent inflationary pressures. Despite economic recovery following the COVID-19 pandemic, core inflation exceeded the Federal Reserve's target of 2% in late 2024 and early 2025. While the Fed has hinted at a cautious easing cycle, the timing and pace remain uncertain. By repurchasing bonds, the Treasury could inject liquidity into the financial system to mitigate short-term interest rate pressure. Analysts noted that such measures could support broader monetary easing goals if rate cuts are delayed or borrowing costs do not adequately decrease. This buyback also carries symbolic significance. In the first quarter of 2025, Treasury officials considered reintroducing buybacks to enhance auction efficiency and boost market confidence. Despite a significant expansion of the federal deficit in 2024, policymakers emphasized that government debt should be managed and traded efficiently. In the past, the US took similar actions in 2000-2001 when debt repayment was feasible due to a budget surplus. Today's fiscal situation is quite different, but operational tools to maintain market order remain effective. The bond market reacted positively to this announcement, with yields of the targeted off-the-run Treasuries slightly declining. Market participants interpreted this action as the Treasury actively addressing structural inefficiencies in the government bond market. Continued or expanded buybacks could reduce borrowing costs and restore investor confidence in US fiscal policy. However, these actions also raise questions about long-term debt sustainability.