Kobeissi thread: Treasury doubles long-end buybacks — “they blinked”, more intervention to come (12 posts, 11 charts)
Kobeissi thread: Treasury doubles long-end buybacks — “they blinked”, more intervention to come (12 posts, 11 charts)
· @KobeissiLetter
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It's official.
On July 31st, we called for US government intervention as long-term borrowing costs hit 2008 levels.
Today, it happened. The US Treasury is DOUBLING buybacks to $4 billion per operation for "liquidity support."
What comes next? Let us explain.
(a thread)
Takeaway
The event is real and primary-sourced: Treasury press release sb0607 (08-19) raises liquidity-support buybacks in the 10–20Y and 20–30Y sectors from $2B to at least $4B per operation, Sept 9 – Nov 4, with more on future buybacks at the Nov 4 refunding. “They blinked” is a fair read of a policy reaction to a 5.3% 30Y. The rest is the Kobeissi voice: “we called for intervention on July 31” is a retrofit (the 07-31 post asked at what point the administration intervenes — a rhetorical question, not a call); the 3.25% 5Y arithmetic and 7%+ mortgages are unverified projections. Harvest the numbers, never credit the calls. Triage and the press-record check are in the desk's 08-19 Treasury buyback capture packet. Thread captured whole because the charts are the unit of value — 11 of 12 posts carry one.
Thread · 12 posts by the author
- 2/12 ↗
On July 31st, the US 30Y Note Yield rose to 5.27%, the highest level since 2007.
This officially marks a +450 basis point rally since the low seen in the 2020 pandemic.
Even as the Fed kept interest rates PAUSED at the July meeting, it did nothing.
Yields just keep climbing.
- 3/12 ↗
But, why?
First, we began the year with market expectations for 3 rate CUTS in 2026.
This quickly shifted to 2 rate HIKES expected in 2026.
Expectations shifted for rates to be 125 basis points higher in a matter of months.
The 2025 global rate cut cycle came to a halt.
- 4/12 ↗
As the Iran War drove oil prices to $100+ per barrel, inflation expectations hit 5%+ by November.
This left the Fed with no option but to halt rate cuts and begin considering rate hikes.
Month-over-month inflation in March and April came in at +0.9% and +0.6%, respectively.
- 5/12 ↗
Today, oil prices are well below their recent highs, but remain +55% above pre-war levels.
Furthermore, Fed expectations have shifted toward a continued pause through the end of 2026.
Meanwhile, yields keep on pushing higher amid record deficit spending and inflation worries.
- 6/12 ↗
Today's intervention by the US Treasury is notable.
Treasury buybacks work by repurchasing older, less-liquid bonds, giving investors a steady buyer while new debt issuance continues.
The goal is to improve liquidity and ease upside in yields.
In other words, they blinked.
- 7/12 ↗
This also marks the second most notable bond market intervention by the Trump Administration.
In April 2025, President Trump said he was watching the bond market when he decided to announce his "90-day tariff pause."
The 10Y Note Yield is now above the peak seen then.
- 8/12 ↗
Take a look at the wording of today's press release.
The doubling of buybacks to $4 billion per operation is in effect from Sept 9th through Nov 4th.
However, the treasury says it will provide "more information" about futures buybacks on Nov 4th.
We expect more intervention.
- 9/12 ↗
The reality is that the US government needs lower interest rates more than anyone.
Over the last 12 months, the US spent $1.4 trillion on interest alone.
By November 2028, this is expected to hit $1.7 trillion per year.
Borrowing costs have more than doubled since 2020.
- 10/12 ↗
For US debt servicing costs to simply stop going up, the US 5Y Yield needs to fall to 3.25%.
This means a -110 point drop would simply keep us at $1.4 trillion in annual interest costs.
The bond market has arguably become the most important long-term fundamental to watch.
- 11/12 ↗
We believe the bond market will continue to serve as a key leading indicator for investors.
As a result, we continue to update our models.
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- 12/12 ↗
Lastly, mortgage rates are back on the rise and we expect new record lows in housing affordability.
Without further intervention, we expect 7%+ mortgage rates.
The era of "free" money has come to an end.
Follow us @KobeissiLetter for real time analysis as this develops.
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