US Treasury increases sizes of long-end liquidity support buybacks

The US Treasury is scaling up its program to buy back older, less-liquid government bonds, with a particular focus on the securities that sit furthest out on the yield curve. Starting September 9, the agency will increase the size of liquidity support buyback operations targeting longer-dated nominal coupon securities, a move that follows a broader overhaul announced during the July 30 quarterly refunding. What’s actually changing For the 10-to-20-year and 20-to-30-year maturity buckets, the frequency of liquidity support operations has been doubled from two per quarter to four. Each of those long-end operations carries a maximum size of $2 billion, while many shorter-dated nominal coupon buckets can run up to $4 billion per operation. Across all maturities and security types, the total quarterly capacity for liquidity support buybacks has been raised from $30 billion to $38 billion. That increase took effect on August 13. The targets of these operations are off-the-run securities. When the Treasury issues a new 10-year note, the previous 10-year note becomes off-the-run. It’s the same creditworthy obligation, but it trades less frequently, which makes it harder and more expensive ...