Long-dated U.S. Treasury bonds rebounded sharply on Wednesday after the U.S. Department of the Treasury announced a major expansion of its debt buyback program.
The move helped calm a bond-market selloff that had pushed long-term yields to their highest levels in nearly two decades.
U.S. Treasury Yields Fall Sharply
The benchmark 10-year Treasury yield fell nearly 10 basis points to 4.647%, down from a previous high of 4.742%.
The move was even stronger in longer-dated bonds.
The 30-year Treasury yield dropped almost 14 basis points to 5.198%, moving back below the key 5.20% level. On Tuesday, the yield had climbed as high as 5.337%, its highest level in 19 years.
Short-term yields were much more stable.
The policy-sensitive 2-year Treasury yield remained near 4.169%, compared with 4.158% previously.
Washington Expands Treasury Buyback Program
The U.S. Treasury said it will significantly increase the size of its liquidity-support buyback operations for longer-dated government debt.
Under the revised program, the maximum size of each operation will rise from $2 billion to at least $4 billion.
The purchases will focus mainly on older Treasury securities in the 10-year to 20-year and 20-year to 30-year maturity ranges.
These bonds are often referred to as off-the-run Treasuries because they are older issues and usually trade less actively than newly issued government debt.
How Treasury Buybacks Support the Bond Market
A Treasury buyback allows the U.S. government to repurchase older government bonds directly from financial institutions.
By increasing the size of these operations, Washington is effectively providing more liquidity to parts of the Treasury market that can become difficult to trade during periods of stress.
The larger program gives banks and bond dealers additional confidence that the government can step in as a buyer when demand for older long-term securities weakens.
The extra liquidity may help reduce market volatility and improve trading conditions across longer-dated Treasury securities.
New Buyback Limits Begin in September
The expanded Treasury buyback program will take effect on September 9, 2026.
The new limits will remain in place through the current refunding quarter, which ends on November 4, 2026.
Further details are expected when the Treasury publishes its next Quarterly Refunding statement.
Officials said the decision is designed to improve structural liquidity in longer-dated Treasury markets, where dealers regularly submit large volumes of high-quality securities for repurchase.
Bond Market Rebounds After Tuesday Selloff
The announcement followed a sharp global bond-market decline on Tuesday.
Investors had aggressively sold long-term government bonds, pushing borrowing costs higher and raising concerns about broader financial conditions.
The selloff was partly driven by worsening geopolitical tensions in the Persian Gulf and growing concerns about inflation.
Iran Conflict and Oil Prices Add Inflation Pressure
Tensions intensified after Iran reportedly adopted a more aggressive military posture, while commercial traffic through the Strait of Hormuz slowed sharply.
At the same time, Brent crude moved above $91 per barrel, increasing fears that higher energy costs could fuel another wave of inflation.
That combination raised concerns about a possible stagflationary environment, in which inflation remains high while economic growth weakens.
Bond traders responded by demanding higher yields on long-term U.S. government debt, sending the 30-year Treasury yield to 5.337% before Wednesday’s reversal.
Treasury Market Outlook Remains in Focus
The Treasury’s expanded buyback program has provided immediate relief to the long end of the U.S. bond market.
However, investors remain focused on inflation, oil prices, geopolitical risks and future Federal Reserve policy.
If energy prices stay elevated or Middle East tensions worsen, long-term Treasury yields could remain volatile despite Washington’s efforts to improve market liquidity.
