JP Morgan strategists warned markets may view the US Treasury’s surprise effort
to suppress long-term financing costs via expanded bond buybacks as lacking
credibility, which could lift the term premium and Treasury yields over time.
The Treasury on Wednesday said it would at least double buyback size to provide
“greater liquidity support,” a move intended to lower long-term yields. JP
Morgan called the measure a stopgap, noting the US is near full employment while
running roughly a 6% fiscal deficit; strategists including Jay Barry wrote that
without genuine fiscal consolidation, the market may find the action not
credible and that any shift away from a “regular and predictable”
debt-management posture could push term premia and yields higher. US Treasury
Debt has topped $40 trillion, complicating control of funding costs amid ongoing
issuance. A market survey showed about 60% of users expect US debt
conditions to worsen until a major crisis.
