Bessent could tap near $1 trillion Treasury General Account to fund bond buybacks, sources said
Using the TGA would provide the Treasury with considerable firepower to influence long-term bond yields.
TL;DR
- The Treasury may utilize its near $1 trillion General Account (TGA) to fund increased purchases of government bonds.
- This action, termed a "Treasury Twist," could provide substantial leverage to influence long-term bond yields.
- The Treasury surprised markets by doubling buybacks of off-the-run securities and may even exceed the new minimum.
- The use of the TGA was not explicitly mentioned in the announcement, leading to market speculation about funding sources.
- Using the TGA could counter market skepticism regarding the effectiveness and resources available for the buyback operation.
- The TGA is the government's checking account held at the Federal Reserve, currently holding around $950 billion.
- Officials have not specified the amount or timing of any TGA utilization.
- Reducing the TGA could pose a risk in the event of a debt ceiling impasse, though a new limit is not expected until next year.
- The Treasury officials defended the surprise announcement, stating it aimed to focus the market on fundamentals rather than headlines.