Treasury Increases Buybacks
Just two weeks after announcing its buyback calendar at the quarterly August refunding, the US Treasury surprised markets by announcing it would at least double the size of its liquidity support buybacks for longer-dated Treasuries. Beginning September 9, Treasury will increase the maximum size from $2 billion per operation to at least $4 billion per operation in the 10- to 20-year and 20- to 30-year sectors.1 The $4 billion number is not the total amount Treasury plans to purchase, instead it is the maximum amount Treasury can buy in each operation. The previously announced calendar called for up to $14 billion of total buybacks in 10- to 30-year Treasuries between September 9 and November 4, at least doubling those operations would suggest another $14 billion or more of purchases over the period.2
In support of this new move, Treasury Secretary Scott Bessent’s comments focused on longer-term borrowing costs, calling the buyback program part of a “big toolkit” available to Treasury. These purchases are primarily intended to improve liquidity in older “off-the-run” Treasuries, which tend to be less liquid than newly issued benchmark securities. Treasury said the increase reflects the significant volume of high-quality offers it has been receiving from investors as the most recent $2 billion operation for bonds maturing between 2046 and 2056 was 10 times oversubscribed.3
From this reaction, the messaging is clear as the Treasury watches the long end of the curve and is increasingly not comfortable with the recent move higher in yields. This sentiment was certainly noticed by the market, as the 30-year Treasury yield fell as much as 10 basis points to 5.18% following the announcement, moving away from its highest level since 2007 and long-dated Treasuries rallied 1.7%, their best day since February 2025.4 We think this reaction is important because the actual dollar increase in buybacks is relatively small compared with the size of the Treasury market meaning that the market was reacting to the message as investors now know that the Treasury is watching and has demonstrated a willingness to act on the trend in treasury rates.
Treasury General Account Adds Another Tool
The story became even more interesting when the Treasury mentioned potentially funding the larger buybacks by drawing down some of the cash sitting in the Treasury General Account, or TGA.
The TGA is essentially the Treasury’s cash account at the Federal Reserve, standing at around $935 billion.5 The Treasury normally maintains a large balance to provide a cushion for government expenses, including Social Security payments and payments to federal employees and contractors. Instead, Treasury officials indicated that some of its existing cash could potentially be used to purchase higher-yielding older securities rather than issuing more short-term Treasury Bills as bond dealers initially assumed. This distinction is important. If Treasury issues additional bills to finance buybacks, it is essentially replacing one form of government debt with another, replacing longer-duration securities with shorter-duration debt. Drawing down excess cash from the TGA could allow Treasury to purchase longer-dated securities without issuing the same amount of new debt to finance those purchases.
While historically the TGA has maintained at least five days of government expenditures, or a minimum of $150 billion,6 in the account as a buffer against an unexpected disruption in the debt markets, officials have not said how much, if any, of the TGA will ultimately be used to fund buybacks and have not yet ruled out issuing short-term bills to supplement the payment. While the current number of buybacks would not require a significant drawdown of the TGA. A reduction in Treasury’s cash balance could ease pressure on the short end of the curve, which is where the Fed targets rates, while also having implications for the Fed’s balance sheet. Treasury typically draws down the TGA after reaching the statutory debt ceiling because it can no longer engage in net new borrowing. If cash were instead used to pay down debt through buybacks, it could also extend the amount of time before the debt ceiling itself is reached.
Long-Term Impact on the Yield Curve
Not surprisingly, Wall Street is divided on how effective the program will ultimately be. JPMorgan argues that buybacks address the symptom rather than the underlying fiscal issue and warned that moving away from Treasury’s traditional “regular and predictable” approach could actually increase the term premium over time.7 Goldman Sachs also believes buybacks by themselves are unlikely to meaningfully reset long-term rates. Interestingly, Goldman points to cyclical resilience, fiscal pressures, energy risks, and AI capital expenditures and growth optimism as some of the reasons long-term yields have moved higher.8 Citi is more constructive and believes the 20-year Treasury now has better asymmetric risk-reward because of attractive valuations, potential pension demand, softer data, and what it calls the new Treasury “put.” Citi also believes a more dovish Fed could bring real money demand back into Treasuries.9
At the end of the day, the Treasury cannot change the fundamentals that ultimately determine long-term interest rates, and the fiscal situation remains something investors will continue to watch. But the bigger takeaway is that the Treasury’s toolkit may be broader than markets originally thought. The market reaction reinforces that point. The original buyback announcement pushed the 30-year yield down roughly 10 basis points, while the subsequent report about potentially using the TGA pushed the 10-year yield down another 4 basis points.10 Lower long-term yields would help mortgage rates, corporate borrowing costs, and overall financial conditions while also providing support for equity valuations. While Treasury buybacks alone won’t solve the long-term rate issue, markets now know Treasury is watching, and importantly, it may have additional firepower if needed.
Iran Economic Pressure Increases
Treasury also provided more details this week on its efforts to increase economic pressure on Iran, announcing sanctions against more than 60 entities. The sanctions focus on five of Iran’s most vital lifelines including digital assets, technology, gold, aviation, and shipping. Despite the aggressive rhetoric, the initial action appears to be more of a warning than the full deployment of the sanctions threat. Importantly, no major Chinese financial institution was named among the sanctioned entities, despite China buying the bulk of Iran’s oil, being responsible for almost 80% of Iranian crude exports.11 The real test of escalation will be whether the U.S. ultimately follows through by targeting large Chinese financial and energy institutions. When Bessent was specifically asked whether the U.S. was prepared to cut off major Chinese banks for facilitating trade with Iran, he responded that “no one is above the reach of US sanctions,” but did not identify China or any other country by name.
For now, we view the announcement as largely symbolic and a threat of what could come next rather than the full economic action implied by the initial rhetoric. As a result, markets took the news relatively well. The S&P 500 maintained earlier losses of about 0.3%, the dollar gained 0.2%, and the 10-year Treasury yield held steady around 4.70% following Bessent’s comments.12 At the end of the day, the administration has clearly increased the threat of economic pressure on Iran. However, until the U.S. demonstrates that it is willing to sanction the major financial and energy institutions facilitating Iran’s trade, particularly those connected to China, we would view the current measures as more of a warning and negotiating tool than a full economic escalation.
Canada Trade Talks Break Down
U.S.-Canada trade negotiations broke down late last week after the two sides could not agree on the details of a potential agreement. According to Canada’s ambassador to the U.S., there was not one specific issue that ended negotiations. Instead, Canadian officials believed the written terms of the agreement increasingly differed from what they thought had been agreed to during negotiations. Following the breakdown, the U.S. imposed a 50% tariff on certain Canadian goods, while Canada announced retaliation scheduled to begin September 8. Despite headlines, it is important to put the actual amount of affected trade into perspective. The U.S. and Canada conduct roughly $720 billion in annual goods trade, with approximately 95% continuing to flow tariff-free under USMCA.13 The new 50% tariff is concentrated on roughly $20 billion of Canadian imports, a relatively small portion of the overall trading relationship. So, while the tariff rate itself is significant, the amount of trade directly affected is considerably smaller than the headline might suggest.
Importantly, communication between Canadian officials and the U.S. administration has continued, leaving the door open for negotiations to restart. The latest tariff developments will likely serve as another period of short-term uncertainty rather than necessarily a permanent change in the U.S.-Canada trade relationship. There will likely be additional headlines and volatility as both sides work through their differences, but continued communication gives them an opportunity to return to the negotiating table. At the end of the day, the tariff “unknowns” will eventually become “knowns,” allowing businesses and investors to move past the headlines and refocus on the underlying economic and market fundamentals.
[1] US Department of The Treasury, As of August 19, 2026
[2] Bloomberg Intelligence, As of August 21, 2026
[3] Bloomberg, As of August 19, 2026
[4] Bloomberg, As of August 19,2026
[5] Bloomberg, As of August 24, 2026
[6] Bloomberg Intelligence, As of July 24, 2026
[7] Bloomberg Intelligence, As of August 19, 2026
[8] Bloomberg Intelligence, As of August 19, 2026
[9] Bloomberg Intelligence, As of August 19, 2026
[10] Bloomberg, As of August 26, 2026
[11] Bloomberg, as of August 26, 2026
[12] Bloomberg, as of August 26, 2026
[13] Bloomberg Intelligence, as of August 22, 2026
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