The U.S. Department of the Treasury on Friday bought back $2 billion of its own debt. The Treasury has now bought back roughly $6 billion of its national debt in the first week of February alone.
The dealer offered $25.5 billion for the bonds, but the Treasury only accepted $2 billion. The buyback demonstrates a careful, targeted approach to improve trading in less active bonds.
Do debt buybacks point to liquidity concerns?
The buyback also targeted nominal coupon securities maturing between February 15, 2046, and November 15, 2055. The initiative comes as the Treasury seeks liquidity support, driven by strained market conditions and volatile yields.
The Treasury bought back more than $67.5 billion in debt between 2000 and 2002 to manage maturities. In May 2024, the Treasury restarted the program and said it aims to support market liquidity. Just last year, the Treasury repurchased $10 billion in debt from $22.7 billion in offers.
The increased debt buybacks indicate strong institutional demand and a surge in their use to manage the bond market. Buybacks tend to inject cash into dealers and banks who sell bonds, helping ensure smooth price discovery and trading.
At the time of publication, the U.S. 10-Year Treasury yield is hovering around 4.29%, while the 2-Year Treasury Yield is at 3.48%. The 10-Year yield recently stabilized around 4.3% after fluctuations, showing confidence that the government is managing its debt carefully. The steady yields also show that some investors view the buyback as a sign of strength, while others raise concerns about long-term demand for U.S. debt.
The Treasury revealed this week that it plans to keep auction sizes unchanged for nominal notes and bonds. The initiative will run for at least the next several quarters.
On Wednesday, the Treasury released its buyback schedule for its upcoming refunding quarter. The Treasury anticipates purchasing up to $38 billion in off-the-run securities in Q2 to support liquidity and roughly $75 billion in the 1-month to 2-year timeframe to manage cash.
This year, the Treasury is also planning to shift its buyback operations to the Federal Reserve Bank of New York’s new trading platform, FedTrade Plus. Treasury plans to conduct a small-value test buyback, which it said it will announce at a later date.
Will the Treasury’s buyback program lower U.S. debt this year?
The current U.S. debt is slightly above $38 trillion, which is one of the highest totals ever recorded. The Joint Economic Committee also expects the U.S. national debt to reach $39 trillion this year.
Solomon said at the Economic Club of Washington in late October 2025 that the path out for the growing U.S. debt is economic growth. The large debt requires more buyers, but if there are fewer of them, the burden will eventually shift to U.S. citizens.
The growing U.S. debt means the government spends more but borrows by issuing bonds to cover the gap. Over time, those deficits have accumulated, but a third of the debt is maturing within the next 11 months. The Committee for a Responsible Federal Budget (CRFB) projected that the One Big Beautiful Act will add more than $5.5 trillion to the national debt by 2034.
The budget deficit means the U.S. government must issue new bonds to replace old ones. However, if deficits keep growing and debt becomes larger, investors naturally become more cautious.
The Federal Reserve is required to step in by creating new money by buying new government bonds itself through Quantitative Easing. The Fed has already begun the shift late last year from Quantitative tightening, which removes money from the system.
Source: https://www.cryptopolitan.com/why-u-s-treasury-bought-back-its-own-debt/
