Wall Street institutions pour cold water on the U.S. Treasury's use of the trillion-dollar Treasury General Account (TGA) to buy back U.S. bonds: "It's difficult to suppress long-term bond yields."
CNBC reported that the U.S. Treasury Department is considering using funds from its nearly $1 trillion Treasury General Account (TGA) to support Treasury bond buybacks. In response, Deutsche Bank believes that even if the Treasury uses TGA to fund buybacks, the impact on bank reserves and short-term Treasury issuance would likely be "largely zero." Goldman Sachs and Wells Fargo further pointed out that buybacks alone are unlikely to reverse the upward trend in long-term Treasury yields, unless the U.S. government simultaneously addresses the expanding fiscal deficit and inflationary pressures. A Goldman Sachs research report on August 21 argued that expanding long-end Treasury buybacks does not address the primary sources of recent long-end volatility, namely fiscal deficits and inflation risks, and therefore is unlikely to have a meaningful repricing effect on long-term interest rates. Wells Fargo also stated that long-end yields face structural pressures rather than short-term liquidity issues.
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Disclaimer: This content reflects the author's personal views only and does not constitute investment advice.
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