Deutsche Bank on Treasury Buyback Announcement - FJElite

Markets recovered yesterday after the US Treasury unexpectedly announced it would at least double the size of buyback operations for longer-dated Treasuries. The move drove the 30-year yield down 9.2bps to 5.19%, its biggest decline since June, while the yield curve flattened sharply. The increased buybacks will cover 10-30 year maturities, with the maximum size per operation rising from $2bn to at least $4bn from September 9 through November 4.

Although the amounts are small relative to the overall Treasury market, the announcement signalled a willingness to support the long end after 30-year yields recently reached their highest since 2007. The move also had broader cross-asset effects: gold surged 4.18%, its biggest gain since March, while the dollar index fell 0.83% to a three-month low as investors considered the implications for financial repression and long-term rates.