The U.S. Treasury Department is signaling it could deploy its nearly $1 trillion cash reserve at the Federal Reserve to fund an expanded campaign of buying back longer-term government bonds, according to senior Treasury officials.
The move would represent a significant escalation of Secretary Scott Bessent’s effort to lower long-term borrowing costs without relying on the central bank.
How the “Treasury Twist” works
Last week, the Treasury doubled the size of its buybacks of off-the-run long-term securities from $2 billion to at least $4 billion, an operation Bessent called a “Treasury Twist” — buying long-dated bonds while issuing short-term debt.
But the initial rally in bonds quickly faded as analysts questioned whether the Treasury had enough firepower to meaningfully move yields in a $40 trillion debt market.
Using the Treasury General Account — essentially the government’s checking account — could change that perception.
A bigger war chest than Biden’s
Bessent has built the TGA to roughly $950 billion, far exceeding the $550 billion to $600 billion target maintained under the Biden administration.
The officials did not say how much of the account might be used or when any announcement could come.
Bonds rallied on the news Monday morning, with the 30-year Treasury yield falling 0.04 percentage points to 5.23%.
Limits of the approach
The Treasury’s capacity remains small relative to the overall debt market, at least without Federal Reserve coordination.
Fed Chairman Kevin Warsh has remained silent through these developments but is scheduled to speak Friday at the Jackson Hole Economic Policy Symposium.
Reducing the TGA would leave less cash on hand in the event of a debt ceiling standoff, though current estimates suggest a new limit won’t be reached until winter or early spring.
