The Treasury tripled the size of its buybacks

The federal government owes just over $40 trillion with interest on that debt at $1.27 trillion over the last eleven months.

And those numbers continue to grow as the 30-year Treasury yield climbed to its highest level since 2007.

The Treasury's current answer to that problem is to start buying its own high interest long-term bonds back in larger quantities.

By buying these long term bonds back they can attempt to lower their long term costs by driving interest rates down and refinancing in the short term with short term Treasury bills, then as that short term debt matures, refinance again at lower long term rates.

Prior to last week the Treasury could buy up to $2 billion worth of bonds at a time. Treasury Secretary Scott Bessent increased that limit to $6 billion, and on September 10 bought $5.2 billion worth of long bonds in a single afternoon. It was the largest long-end buyback in the program's history.

Stanley Druckenmiller thinks this is the wrong tool for the problem. In a Wall Street Journal op-ed in August, he argued the 30-year is not high because the bond market is broken. It is high because the government is borrowing an enormous amount and lenders want to be paid for it. A buyback does not change the borrowing. He wrote, "If the 30-year must trade at 5.5% to clear, that isn't a crisis. It is an invoice."

Until next week,
Jacob