5 hours ago - Economy

Treasury's bond market intervention could grow

Neil Irwin

Treasury secretary Scott Bessent — Treasury Secretary Scott Bessent. Photo: Daniel Heuer/Bloomberg via Getty Images

The Treasury Department intervened in the bond market last week, looking to lower long-term rates by buying back longer-term debt and effectively swapping it for shorter-term debt. There are new hints of how that effort might escalate from here.

Driving the news: CNBC's Steve Liesman reported that the Treasury could use its $950 billion account with the Federal Reserve — essentially the U.S. government's checking account — to fund further repurchases of longer-term bonds.

It amounts to a bigger stash of financial ammunition than the planned $4 billion Treasury intervention that was announced last week.

Bonds rallied on the CNBC report, with the yield on 30-year Treasuries falling 0.04 percentage point Monday morning, to 5.23%.

State of play: The Trump administration has built a bigger cash buffer in the so-called Treasury General Account than the Biden administration, and appears willing to use that cushion to hold down borrowing costs.

Reality check: The Treasury's capacity to intervene is still limited relative to the $40 trillion national debt, at least without the Fed's coordination and its limitless capacity to create money from thin air.

The Fed and its chairman, Kevin Warsh, have been mum through the events of the last week. Warsh is scheduled to speak Friday morning at the Jackson Hole Economic Policy Symposium.

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Treasury's bond market intervention could grow

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