In its latest research report, Barclays stated that the U.S. Treasury's doubling of its liquidity support repurchase program for long-term Treasury bonds indicates that officials have taken note of the recent upward pressure on long-term yields.
1. The new quota is equivalent to an increase of approximately $16 billion per quarter ($64 billion annually) in repurchase volume, representing about 15% of the annual issuance of 20-year and 30-year bonds. Converted to an equivalent 10-year duration, this equates to a reduction of approximately $100 billion in supply annually.
2. This move could lead to a decrease of approximately 10 basis points in the long-term term premium. While the absolute impact on the overall market is limited, it sends a clear signal to investors: the Treasury is willing to make adjustments if long-term yields continue to rise.
The auction size of nominal coupon-bearing Treasury bonds and floating-rate bonds will remain unchanged for at least the next few quarters, but a clear signal of reducing long-term bond issuance may be given at the November meeting.
3. Policy intervention can only buy time; only fiscal tightening is the fundamental way to resolve upward pressure on yields. Referring to Japan's two attempts to reduce the issuance of long-term government bonds since 2025, the effects were not lasting, and yields subsequently reached new highs. Currently, the sell-off of US long-term Treasury bonds far exceeds the Treasury's repurchase limit (as shown in the figure below, the value represents the ratio of the amount of bonds the market wants to sell to the Treasury's repurchase limit; the larger the value, the greater the selling pressure).
