U.S. Treasury May Use Nearly $1 Trillion TGA to Support Treasury Buybacks, Market Debates Nature of Operation
The U.S. Treasury may utilize nearly $1 trillion from the Treasury General Account (TGA) to support an expanded Treasury buyback program, drawing market attention. The TGA balance is approximately $950 billion, significantly higher than the previous level of $550 billion to $600 billion.
Bloomberg macro strategists noted that if the TGA is used to purchase long-term Treasuries, the operation is closer to a net liquidity injection rather than a strict Treasury Twist, as the reserves exchanged for TGA cannot be reused before the government meets its obligations, exerting slight upward pressure on inflation. Market reactions show a decline in the 10-year yield while the short end rises, with gold and Bitcoin strengthening simultaneously.
Treasury officials clarified that the announcement to expand buybacks does not change the official auction schedule, with preparation time remaining until the first operation on September 9, and the quarterly plan has already been disclosed. The next round of debt ceiling crisis may not trigger until winter next year, allowing ample time for account rebuilding. Bessenet previously referred to this as a Treasury Twist operation, but the actual transmission path is more complex.
Mechanically, the event-driven interpretation of Treasury liquidity tools is diverging. Funds are flowing into long-term Treasuries, gold, and Bitcoin, benefiting long-duration assets and safe-haven targets, while positions sensitive to short-term supply and inflation expectations are under pressure. TGA intervention alters expectations of traditional twist operations.
Source: Public Information
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Bessenet has pushed the TGA balance up to nearly $1 trillion during his tenure, providing potential ammunition for buybacks. Unlike classic twist operations financed by issuing short-term notes, utilizing existing TGA balances is akin to releasing stock reserves, resulting in a net injection effect.
On the capital path, the Treasury supports long-term buying with a high TGA buffer, aiming to lower long-term yields while maintaining stable auction rhythms. The market views gold and Bitcoin as more direct QE-like trading targets, reflecting a repricing of liquidity and inflation paths. We are currently in the experimental phase of the "Treasury actively managing the yield curve" tool.
Comparing historical twist operations and quantitative easing by the Federal Reserve, the key difference lies in whether the funding source adds new reserves.
Essentially, this involves capital concentration and regulatory changes. The mechanism is that the Treasury intervenes in the bond market through existing cash accounts, blurring the boundaries between fiscal and monetary operations, causing long-term yields to be influenced by policy buying while altering market expectations for short-term supply and liquidity structures.
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Once TGA balances are utilized, the nature of the operation shifts from distortion to injection.
The market's reaction to QE-like measures is often more direct than the official definitions.
The true master of the yield curve is the one who can control both supply and buying.