World Panics: Trump Deploys Unusual Tactic to Rescue American Debt
The United States Department of the Treasury has taken a major step to ease pressure in the bond market by expanding buybacks of long-dated US government securities, or US Treasuries. The policy was announced after a sell-off pushed the yield on 30-year US Treasuries to 5.337% in trading on Tuesday (18/8/2026), its highest level since 2007. The yield on 10-year US Treasuries also surged to 4.739%.
The pressure was triggered by concerns over inflation, rising energy prices due to the war in the Middle East, and the swelling financing needs of the US government. The large volume of bond issuance has led investors to demand higher yields to absorb the additional supply of government debt. Rising yields have the potential to increase the government’s interest costs. The pressure could also spill over into mortgage rates, corporate loans, and various financial instruments that reference US Treasuries.
The buyback announcement was immediately met with a market response. According to Refinitiv data, in trading on Thursday (20/8/2026), the 30-year Treasury yield fell to around 5.181%, while the 10-year yield eased to 4.637%.
The US Treasury announced it would increase the value of liquidity support buybacks for long-dated government securities. Purchases will focus on nominal bonds with remaining maturities of 10-20 years and 20-30 years. The purchase limit, previously a maximum of US$2 billion, will be increased to at least US$4 billion in each operation. The policy will take effect from 9 September to 4 November 2026. The Treasury will provide an explanation of the purchase value for the next period in the Quarterly Refunding agenda on 4 November 2026.
“The increase in the value of these buyback operations reflects the Treasury’s desire to provide greater liquidity support for long-dated nominal bonds,” the Treasury wrote in an official statement.
The US Treasury buyback programme was launched in May 2024. The scheme provides an opportunity for market participants to sell old government securities to the government through regularly scheduled operations. In July 2025, the Treasury increased the frequency of purchases for the 10-20 year and 20-30 year tenor groups from two to four times per quarter.
However, the latest decision has raised questions because it was announced outside the quarterly financing plan update. Jefferies economist Thomas Simons, as reported by Reuters, said he was surprised that the change was not conveyed in the Quarterly Refunding agenda around two weeks earlier. According to him, a change announced suddenly could raise questions about the transparency and consistency of the government’s financing strategy.
The timing is also close to the US midterm elections on 3 November 2026. In his analysis, he assessed that easing pressure in the bond market could help reduce attention on the government debt problem ahead of the vote. However, the Treasury did not state that the programme was related to any political agenda.
The Treasury buys outstanding government securities from market participants, especially older bonds known as off-the-run securities. These bonds can still be traded, but are usually not as liquid as the newest government securities with similar maturities. Trading activity tends to be concentrated in newly issued or on-the-run securities. When liquidity in older bonds declines, investors may have difficulty selling them in large quantities without depressing prices. The spread between bid and ask prices can also widen.
Through buybacks, the government provides an additional buyer for these bonds. Investors gain an opportunity to sell their holdings, while trading activity and price formation are expected to become smoother. The purchases are conducted through reverse auctions. Bondholders offer their securities to the Treasury, and the government then determines which offers are accepted based on price and debt management needs. Not all bonds offered are automatically purchased. The US government can select the series and prices it deems most suitable.
However, buybacks do not directly resolve the problem of the large US debt and financing needs. Investors still face uncertainty regarding inflation, the budget deficit, and the direction of Federal Reserve interest rate policy. These conditions have pushed the term premium on 10-year US government bonds to its highest level in 12 years. The term premium is the additional yield investors demand to bear the risk of holding long-term bonds, especially when the direction of inflation, interest rates, and fiscal conditions is difficult to predict. As long as these factors have not improved, bond buybacks are likely to only help contain pressure in the short term.
Several months before the United States expanded its bond buybacks, the Indonesian government had already entered the secondary market to purchase government securities, or Surat Berharga Negara (SBN). The operations were conducted in May 2026 when the rupiah was under pressure and foreign investors were selling Indonesian government bonds. In three operations, the Ministry of Finance purchased SBN worth a total of Rp2.2 trillion. The first purchase was made on Wednesday (13/5/2026) amounting to Rp100 billion. The government then re-entered the market on Monday (18/5/2026) with a purchase of Rp800 billion. The value was increased to Rp1.3 trillion on Tuesday (19/5/2026). The government prepared a ceiling of up to Rp2 trillion per day. However, the purchase amount followed the availability of SBN offered.