The U.S. Treasury steps in to support the market, pushing down the U.S. Treasury yields that have been pressuring global stock markets. The U.S. Treasury announced that it will at least double the size of its buyback program for long-term Treasury bonds. After the news broke, the prices of ultra-long Treasury bonds issued by the U.S. government surged sharply. The backdrop to this move is that global long-term bond markets have recently suffered large-scale selling, and the yield on the 30-year U.S. Treasury briefly spiked to the highest level since 2007 on Monday. At the same time, traders are preparing for a new issuance auction of $16 billion worth of 20-year Treasury notes scheduled to take place soon. In a statement, the U.S. Treasury said, “By increasing the size of the repurchase operations, the Treasury aims to provide stronger liquidity support for the long-dated nominal Treasury market. Within these maturity ranges, market participants have consistently demonstrated strong and stable appetite, which is evidenced by the large volume of high-quality bids the Treasury regularly receives in its long-dated Treasury repurchase operations.” Under the accelerated repurchase plan, the Treasury will focus on repurchasing Treasuries in the 10-to-20-year and 20-to-30-year maturity ranges. Since the end of June, the U.S. Treasury markets in these maturities have been plagued by a “buyer walkout,” with investors’ willingness to take on the bonds clearly lacking. According to the Treasury’s announcement, the government will increase the maximum size of each repurchase operation “by at least” double—from $2 billion to “at least” $4 billion.
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