US Treasury weighs cash account to fund buybacks
The United States Treasury Department could tap its nearly $1 trillion cash account to help fund planned purchases of government bonds, two Treasury sources told US media.
The Treasury announced last week that it would double the maximum size of liquidity-support buybacks in the 10 — to 20-year and 20 — to 30-year sectors from $2 billion to at least $4 billion per operation, starting Sept 9 and continuing through Nov 4.
Treasury Secretary Scott Bessent told CNBC that the move was aimed at keeping markets focused on fundamentals rather than headlines during "a quiet period in a thin market". However, he did not specify how the purchases would be financed.
The two sources told CNBC that it was not formally known how much of the Treasury General Account could be used, or whether it would be used beyond purchases of off-the-run securities. But they said the account was "considered to be available".
Markets reacted to the announcement on Monday, with the 10-year Treasury yield closing at 4.703 percent, down about 0.04 percentage points from the previous close, while the 30-year yield fell to 5.230 percent.
If the Treasury taps the TGA, the move could affect long-term bond yields, CNBC reported.
Bessent said the department could seek more than the planned $4 billion depending on market needs, describing the measure as a response to "very poor" liquidity in the 30-year sector.
The operation could resemble a "Treasury twist", in which the government or Federal Reserve buys long-term Treasurys and finances the purchases with short-term issuance, he said.
Financial publication Barron's said Treasury purchases of existing long-dated government debt would create "an immediate buyer bid", boosting bond prices and lowering yields, and providing short-term relief to the fixed-income market.
The TGA serves as the federal government's checking account at the Fed. Funded mainly by government receipts, including tax collections, it holds about $950 billion.
The account is controlled by the Treasury rather than the Fed and is not itself a monetary policy tool.
A drawdown from the TGA would leave the government with a smaller cash cushion during a potential future debt-limit standoff, especially if the debt ceiling is reached.
However, the Bipartisan Policy Center think tank estimates that the US will reach its $41.1 trillion statutory debt limit between late winter and mid-2027. If the limit is reached, the Treasury would have to use extraordinary measures, while Congress would need to vote to raise or suspend the ceiling.
'Band-aid' relief
Any funds drawn from the TGA could be replenished before then. However, Barron's warned that TGA-funded buybacks could amount to little more than a "band-aid".
Bond traders viewed the move as "temporary relief" rather than a reversal of the "overall high-yield environment", Barron's reported, adding that underlying federal borrowing needs remain substantial.
CNBC said any use of the TGA, whether large or small, could affect bond yields. Even the prospect of the Treasury using the account to buy government bonds could move markets, it added.
Japan, the United Kingdom and China are the largest foreign holders of US government debt, according to US Treasury data.
The planned bond purchases come after US gross federal debt surpassed $40 trillion last week.
Christopher Ball, director of the Central European Institute at Quinnipiac University and the Istvan Szechenyi Chair in International Economics, told China Daily that the debt burden could eventually force painful choices.
"If it were at a more reasonable level, then we could pay a little more in taxes or cut a little spending, not too much and not too painfully," he said. "But when it is that high, it means we have to suffer serious pains or go bankrupt."
Experts said the record debt has been driven in part by defense spending, social programs and interest charges, which now account for a significant share of federal spending.
