The U.S. Treasury plans to repurchase up to $6 billion in U.S. government debt

Scott Besant's Treasury Department is preparing to buy back up to $6 billion in U.S. Treasuries

After Scott defended actions around the yen, his Treasury Department is preparing to buy back up to $6 billion in U.S. Treasuries. The Ministry of Finance announced the plan on Wednesday and said the goal was to keep government bond trading running smoothly. The scale of this repurchase is about three times the usual size. As early as August 19, Scott had said the Treasury planned to buy back at least twice the normal level of old securities.

The Treasury also said future operations would be worth at least $4 billion each time. This week's buybacks will target 10-year and 20-year notes, which are typically trading less actively than short-term debt. According to authorities, larger repo sizes will help maintain market liquidity, and traders are focusing on the impact of the move on yield growth, which is currently at levels unseen since the pre-crisis period in 2008.

As long-term yields continue to rise, the Ministry of Finance steps up debt repurchase efforts

The market's performance is not in the Ministry of Finance's interest. After the announcement, yields continued to climb, and long-term bonds even rose by 5 basis points at one point before falling back. It is worth noting that higher yields increase borrowing costs. One basis point is equal to 0.01%.

As of press time, the 10-year yield hit 4.841%, and the 20-year yield reached 5.314%. The 30-year yield rose by about 5 basis points, breaking through the much-watched 5.3% barrier, and eventually stabilizing around 5.307%. The Treasury's repurchase will occur within a 20-minute window before the end of 2 p.m.(Eastern Time) on Thursday.

Several factors are driving up yields. Federal debt has exceeded the $40 trillion mark. Tariffs and the war with Iran have exacerbated inflation concerns. Energy prices have also soared, with crude oil exceeding $100 a barrel on Wednesday. Although the U.S. government bond market is the world's largest and most liquid sovereign debt market, long-term treasury bonds are typically traded more lightly than short-term bonds.

The Treasury is also issuing more debt. Supply this year is 11.8% higher than in 2025, while debt held by the public has climbed to $31.8 trillion, an increase of 8.2%. Investors are being asked to take on more government bonds, while inflation concerns are becoming increasingly difficult to ignore.

Kevin Walsh faces pressure from Trump as Iran conflict drives up inflation

The Federal Reserve is responding to a more severe inflation situation. Price increases accelerated earlier this year as the conflict in Iran pushed up energy costs. Annualized inflation hit a three-year high in May and then fell to 3.4% in July. Even after that decline, it was still 0.7 percentage points higher than a year ago, with energy prices being the main driver.

President Donald Trump said on Wednesday that oil prices may not fall before the midterm elections. After saying Iran "cannot hold on any longer," Donald called its leaders "desperate attempts to influence the election." He then predicted: "Oil prices will drop significantly shortly after the election."

Brent crude exceeded the US$100 per barrel mark for the first time on Wednesday, setting a new high since July, as fighting intensified in the Middle East. More expensive energy may force the Fed to consider raising interest rates again, although the White House hopes for the opposite. Last week, Donald said the Fed "has to act wisely" and cut interest rates. He also wrote: "A strong country means lower interest rates."

Federal Reserve Chairman Kevin Walsh took office in May. Kevin said at the Jackson Hole meeting in August that "the Fed's job is to provide stable prices," but he did not make it clear whether the central bank would raise interest rates soon.

Stanley Druckenmiller, head of the Dukens family office and former mentor of Scott, criticized the Treasury's move in a Wall Street Journal article. Stanley wrote:

"Once markets believe that the Treasury is defending a price, every rise in yields becomes a test of official resolve, and these operations must continue to expand to withstand the test."

He added: "Governments always fail to defend prices against fundamentals. The only variable is how much it costs before giving in."