Treasury General Account buybacks remain an option, CNBC reports
Treasury could use cash held at the Federal Reserve for larger bond buybacks, but officials gave no commitment, amount or timetable.
By David L. Chen · Senior Columnist
· 3 min read
The U.S. Treasury could use its Treasury General Account to help fund expanded purchases of government bonds, CNBC reported, citing two senior Treasury officials. The Treasury General Account buybacks option is not a confirmed funding decision: the officials did not say whether the account would be used, in what amount or when.
The reported option follows Treasury’s announcement that it would increase purchases of longer-dated, off-the-run securities from $2 billion to at least $4 billion per operation. CNBC said the first operation is scheduled for September 9 and that the programme for the quarter was announced on August 19.
The funding question has become part of the market debate over whether the larger operations will have a sustained effect on long-term yields. CNBC reported that an initial bond rally after the buyback announcement had faded as analysts questioned both the programme’s scale and the resources available to support it.
Will Treasury use its General Account for bond buybacks?
There is no public confirmation that it will. According to CNBC’s reporting, Treasury officials described the account as available for the buyback plan, while declining to provide a figure or timeline. They also gave no indication that cash from the account would be used beyond the off-the-run securities covered by the announced operations.
The Treasury General Account is the federal government’s account at the Federal Reserve. CNBC reported that it contains tax collections already received by the government and that Treasury Secretary Scott Bessent had built its balance to about $950 billion, compared with a $550 billion to $600 billion operating target reported under the prior administration.
How could Treasury pay for the purchases?
One approach would be to draw on cash already held in the General Account. Another would be to issue short-term Treasury bills and use the proceeds to purchase longer-dated securities. CNBC reported that officials did not rule out bill issuance, which had been the market’s assumed source of funding.
Bessent described the latter structure in a CNBC interview as a “Treasury Twist,” referring to purchases of longer-term Treasurys financed through short-term issuance. Neither financing route has been selected publicly, according to the report.
The distinction matters for market participants because a draw on the General Account would use existing government cash, while bill issuance would add short-term securities to the market. CNBC said potential use of the account could reduce concerns that the Federal Reserve might be asked to assist. The Fed holds the account, but CNBC reported that it does not regard the account as part of its monetary-policy toolkit.
Treasury officials also told CNBC that the expanded buyback plan did not alter official auction schedules. They said the notice ahead of the September 9 operation gave markets time to prepare, and that it was too soon to assess the programme’s market effect.
This story draws on original reporting from CNBC.
