Bessent could tap near $1 trillion Treasury General Account to fund bond buybacks, sources said
Two senior Treasury officials said the department could use its near $950 billion General Account to fund expanded bond buybacks, potentially giving Treasury Secretary Scott Bessent significant firepower to influence long-term yields.
Intelligence analysis by Llama
The Treasury's surprise doubling of long-end bond buybacks lost market traction amid skepticism about its funding. Now, two senior officials say the near $1 trillion TGA could be tapped as a backstop, potentially restoring credibility to the operation Bessent dubbed a 'Treasury Twist.'
The US government keeps a giant savings account at the Federal Reserve, currently holding about $950 billion. The Treasury Secretary might dip into that money to buy back old government bonds, which could push interest rates down a bit, similar to how buying back a popular toy can make the remaining ones more valuable.
Analysis
Scott Bessent's 'Treasury Twist'
The doubling of off-the-run buybacks from $2 billion to at least $4 billion caught markets off guard, and the lack of clarity on funding has been the chief reason the initial rally in long-duration bonds faded. Bessent himself called the operation a 'Treasury Twist' in a CNBC interview, a deliberate echo of the 1960s Fed operation in which long-duration Treasurys are bought while short-term debt is issued to pay for them. Two senior Treasury officials did not rule out the conventional funding path of selling short-term bills, but the same officials confirmed that the Treasury General Account is also on the table as a source of cash. That changes the optics of the operation considerably, because a TGA drawdown would not require offsetting short-term supply in the near term, leaving the long end unambiguously better bid.
The $950 billion cash buffer
Bessent has accumulated a TGA balance of around $950 billion, well above the $550 billion to $600 billion target the Biden administration publicly maintained under Janet Yellen. Yellen's stated discipline was to hold the account at 'a week ahead of cash needs,' while the current Treasury says its level is set 'consistent with Treasury's long-standing cash balance policy.' That discretionary framing matters: it gives Bessent room to lean on the buffer for buyback operations without breaching any internal rule, particularly with debt-ceiling math now suggesting a new limit will not bind until winter or early spring. The same officials pushed back on the criticism that abandoning the 'regular and predictable' doctrine amounts to market manipulation, noting that no change has been made to the scheduled auction calendar and that the entire quarter's plan was disclosed in the Aug. 19 announcement.
Sept. 9 as the first test
Markets will get their first read on the operation's impact when the first buyback takes place on Sept. 9, nearly three weeks after the announcement, which the officials argue gave dealers ample preparation time. Even before that, the mere acknowledgement that the TGA is available could be enough to shift sentiment, because it neutralizes the most common pushback heard since the announcement: that Treasury resources are too thin to make a meaningful dent in long-end yields. The officials also wanted to close off speculation that the Federal Reserve might be drawn into the operation, noting that while the Fed holds the TGA like a bank, the account is not part of its monetary policy toolkit. Bessent separately told CNBC he expects fiscal progress when tariff revenue returns after court-mandated refunds are replaced, and that top officials are meeting to forge deficit-reduction plans, a signal that the operation is meant to calm markets through a 'quiet period in a thin market' rather than signal a permanent change in Treasury issuance policy.
Key points
- Treasury doubled buybacks of long-end off-the-run securities from $2 billion to at least $4 billion, with first operation set for Sept. 9
- Two senior Treasury officials said the near $950 billion Treasury General Account is available to help fund the purchases
- Bessent dubbed the operation a 'Treasury Twist,' echoing the 1960s strategy of buying long-duration bonds funded by short-term issuance
- The TGA balance of roughly $950 billion is well above the $550 billion to $600 billion target the Biden Treasury publicly maintained
- An initial bond rally faded after the announcement amid skepticism about Treasury firepower, which TGA funding could help reverse
If Bessent deploys even a modest slice of the $950 billion TGA, the operation could credibly anchor long-end yields, easing financial conditions for mortgages, corporate borrowers, and rate-sensitive equities. Bessent also pointed to upcoming tariff revenue replacing court-mandated refunds and to deficit-reduction meetings among top officials, suggesting a credible path to fiscal improvement that markets may eventually price in.
Running the TGA lower to fund buybacks leaves the government with thinner liquidity if a debt-ceiling fight returns sooner than current estimates suggest, and short-term bills may still need to be sold to refill the buffer, muting the long-end benefit. Skeptics also note that without Fed involvement, the scale of even a $4 billion-plus buyback program is small relative to the $27 trillion Treasurys market, limiting its ability to durably influence yields.
