J.P. Morgan Pushes Back on Bessent's Treasury Buyback Fix

The 30-year Treasury yield hit a 19-year high of 5.34% on August 18, according to Reuters, and outstanding U.S. public debt exceeded $40 trillion for the first time the following morning, per NBC News. Treasury Secretary Scott Bessent responded on August 19 by announcing plans to at least double liquidity-support buybacks for bonds maturing in 10 to 30 years, raising the cap from $2 billion to at least $4 billion per operation between September 9 and November 4. Long yields fell nine basis points and stocks rose initially, but the move had largely unwound by Thursday.
J.P. Morgan's co-head of global fundamental research, James Sullivan, said on CNBC's "Squawk Box" that Treasury is repurchasing longer-duration bonds while issuing shorter-dated bills, a swap he compared to "paying your mortgage with your credit card." J.P. Morgan's rates team reportedly warned in client notes that investors could view the intervention as "lacking credibility" and demand a higher term premium, according to Bloomberg. The bank noted the $4 billion increase is small relative to the roughly $32 trillion Treasury market, while supply pressures continue to build: AI companies have issued $200 billion in debt this year, up 80% year-over-year, China's Treasury holdings sit at an 18-year low, and net interest costs reached roughly $857 billion in the first nine months of fiscal 2026.
The 30-year fixed mortgage averaged 6.65% for the week ended August 20, per Freddie Mac, while the 10-year Treasury traded near 4.70% and the 30-year finished the week around 5.27%, both higher than before Bessent's intervention. J.P. Morgan data shows bond yields now sit above the S&P 500's earnings yield. The first enlarged buyback is set for September 9, ahead of the Federal Open Market Committee's September 16 meeting.