(Bloomberg) -- The US Treasury accepted no offers from dealers in a debt buyback operation on Wednesday amid a slide in long-dated Treasuries prices.
The Treasury was targeting to buy back $2 billion in securities with maturities between 2031 and 2034 in a regularly scheduled operation. But it accepted none of the $3.7 billion offered as a move in Treasuries prices ahead of the transaction rendered the prices “stale,” said Daniel Mulholland, senior managing director at Crews & Associates.
Long-dated Treasury yields began moving higher at about 1 p.m. New York time and accelerated about 45 minutes later, during the 1:40 p.m. to 2 p.m. window for the buyback operation, during which designated dealers can make offers to sell certain quantities of eligible securities back to the government at specified prices.
“The market was selling off into the buyback,” Mulholland said. “And presumably, dealers had pre-hedged a lot of those expected sales and consequently had to dump duration when the Treasury bought nothing.”.
Sharp rises in yield pushed the Treasury yield curve even steeper in later afternoon trading. The five-year Treasury yields gap over 30-year bonds narrowed to about 38 basis points — the least since May 2023, with a pick up in volumes also seen.
“The Treasury is not obliged to take any of the offers and seems they didn’t like any they got,” said Thomas Simons, senior US economist at Jefferies. “They would have been just leaning into the sell off.”
(Updates with amount offered in second paragraph. An earlier version corrected amount targeted by Treasury.)
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