Here Comes QE Lite: Yields, Dollar Tumble, Gold Spikes After Treasury Unexpectedly Doubles Size Of Long-End Treasury Buybacks
Over the past several years, one of the more amusing debates gripping the market's Fed-watchers was whether the Fed's treasury buyback auctions were a form of soft QE, with this website consistently arguing that - contrary to what washed out ex-Bridgewater traders with a newsletter to sell may tell you - Treasury buybacks were just that when it comes to what matters such as market reaction, to wit:
*TREASURY SAYS IT'S EVALUATING ENHANCEMENTS TO BUYBACK PROGRAM
"Not QE"
10:31 PM · Apr 30, 2025
*TREASURY INCREASES LIQUIDITY BUYBACK TOTAL TO $30B FROM $15B
"Not QE 2.0" is growing
10:30 PM · Jul 31, 2024
TREASURY DEBT BUYBACK TARGETS COUPONS MATURING IN 2031 - 2034
Next QE rehearsal
And moments ago, Scott Bessent finally resolved the debate when, with 30Y yields at 20 year highs and threatening to blow out higher, the US Treasury shocked markets, sparked a meltdown in yields and surge in equity futures and gold when it announced at 8:30am that they will be "increasing, by at least double, the size of liquidity support buyback operations for longer-dated nominal coupon securities (the 10-year to 20-year sector and the 20-year to 30-year sector). The current maximum size of $2 billion per operation will be at least $4 billion per operation."
This change will be effective September 9, 2026 and will be in effect for the remainder of this refunding quarter (through November 4, 2026). The releases noted that the Treasury will provide more information about future buyback sizes at the next Quarterly Refunding, scheduled for November 4, 2026, in other words it has the benefit of 3 months of "NOT QE" without having to even specify its thinking.
According to the statement, "this increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants, as evidenced by the significant volume of high-quality offers Treasury routinely receives in longer-dated buyback operations."
Translation: Bessent panicked and the justification that there is no liquidity is just a strawman, with the Treasury now freaking out that the demand for AI paper is crowding out demand for Treasuries as we have been warning for the past several weeks, and as we predicted a week ago when looking at the blowing out Treasury skew, "Bessent will be busy.:"
https://www.zerohedge.com/markets/here-comes-qe-lite-yields-dollar-tumble-gold-spikes-after-treasury-unespectedly-doubles