The U.S. Treasury announced that it will double the single transaction limit for liquidity support buybacks of 10 to 30-year Treasury bonds from $2 billion to at least $4 billion. Following the news, long-term bond yields fell, and bond prices rose.

The adjustment covers the nominal fixed coupon bond ranges of 10 to 20 years and 20 to 30 years, effective from September 9 until November 4; the Treasury will arrange four buybacks for 10 to 20-year bonds and three for 20 to 30-year bonds during this window.

Based on a minimum single transaction size of $4 billion, this adjustment will provide at least an additional $14 billion in buyback support compared to the original plan for this quarter, raising the maximum buyback size for long-term bonds to $83 billion. The Treasury emphasized that the purpose of the program is to support market liquidity, not to change the overall issuance scale or implement monetary policy.

Before the announcement, the yield on 30-year U.S. bonds had risen to 5.33%, a nearly 19-year high; after the buyback size was doubled, long-term yields fell significantly from their peak. The decline in yields indicates that the market is factoring in the Treasury's increased demand for existing long-term bonds into prices.

Regarding claims that "one or more investors made large bets on long-duration bond-sensitive ETFs the day before," currently verifiable English public information does not provide specific ETF names, trading directions, option contracts, transaction sizes, beneficiary accounts, or direct connections to the Treasury's announcement. Proximity in time does not prove that traders had prior knowledge of policy information, and related accusations cannot be published as confirmed facts.

In terms of market mechanics, the Treasury becomes an additional buyer of specific long-term bonds, while the main sellers are dealers and investors looking to sell older, less liquid long-term bonds; the buyback reduces the net supply pressure of the relevant bonds in the secondary market, pushing prices up and yields down. Long-duration bond ETFs, rate futures longs, and institutions hedging long bond exposures will benefit in the short term; however, if the buyback only improves liquidity without changing the ongoing large net issuance and inflation expectations, the sustainability of yield declines will still be constrained by fiscal deficits, term premiums, and private sector demand.

Source: Public Information