US 30-Year Treasury Yield Rebounds as Buyback Boost Fades After a Day

How America Finances Its Debt Is Changing

Treasury Buyback Boost Lasted Only a Day

Low-Rate-Era Bonds Near Maturity

Refinancing Will Come at Rates 2 Percentage Points Higher

Long-Term Debt Is Being Shifted Into Shorter Maturities

More Exposed to Rate Volatility

Foreign Buyers That Once Absorbed Supply Are Pulling Back

Long-dated US Treasury yields, which tumbled after the Treasury Department unexpectedly announced a bigger buyback program, recovered most of that decline within a day. The move underscored concerns that temporary measures alone cannot offset the structural forces driving Treasury yields higher. It has also prompted analysis that Treasuries are losing some of their appeal as a safe-haven asset as the market environment around US government debt changes.

US Treasury Yields Rebound in a Day

Data from the Federal Reserve Bank of St. Louis's FRED database show the 30-year US Treasury yield rose 0.07 percentage point during trading on Aug. 20, touching 5.27% at one point. That was close to the level seen before the Treasury Department said a day earlier that it would double the size of each buyback operation to $4 billion from $2 billion.

The 30-year yield briefly fell to about 5.18% immediately after the buyback announcement. But it erased most of that drop within a day, reversing the market mood. Treasury Secretary Scott Bessent said on Aug. 20 that officials would continue monitoring the market because they have many policy tools available. He added that Treasury yields are not properly reflecting underlying economic conditions. The administration will also announce measures this week or early next week with a stronger focus on fiscal discipline, he said.

Investors worry that whatever steps Washington takes will amount to little more than a short-term fix. The US fiscal backdrop is adding to the pressure. A large volume of Treasuries issued during the low-rate era is approaching maturity. According to the Treasury Department, about $8.5 trillion of fixed-rate US government bonds will come due between 2026 and 2028.

Most of that debt will be refinanced at rates about 2 percentage points higher than before. Even if the US government does not take on additional debt, its annual interest burden would still increase by about $170 billion. The reversal of the low-rate era that followed the global financial crisis, after turning with the Covid-19 pandemic, is now delivering a rate shock to the Treasury market as well.

Short-Term Debt Expansion Could Backfire

The US government is responding by shortening the maturity profile of its debt. Short-term debt carries lower borrowing costs than long-term bonds, helping reduce interest expenses. Under the latest buyback plan, the Treasury Department intends to replace outstanding long-dated bonds with medium- and short-term debt.

Treasury bills with maturities of less than one year accounted for 84% of new US government debt issuance last year. The strategy resembles a household relying on cash advances to cover credit-card bills.

The immediate interest burden falls, but future rate risk rises. A 30-year bond locks in borrowing costs for three decades. A three-month or one-year security must be rolled over at prevailing market rates every time it matures. In effect, debt that is nominally fixed-rate begins to resemble floating-rate borrowing with rates repeatedly reset. Inflation shocks, wars and shifts in central-bank policy can quickly raise the cost of Treasury issuance. As volatility spreads across the yield curve, Treasuries lose some of their safe-haven character.

Changes in the makeup of the biggest Treasury buyers are also adding to structural upward pressure on yields. After the global financial crisis, foreign central banks and government-related investors were the main buyers of US government debt. That demand has weakened in recent years. Treasuries held in custody for foreign official institutions at the New York Fed fell to about $2.7 trillion at the end of 2025 from about $3 trillion in 2021. Net foreign purchases of Treasuries totaled $6.8 billion in June, down 88% from $56.6 billion in May.

Hedge funds and stablecoin issuers such as Tether have emerged as major buyers instead. They help support demand for short-term debt, but they do not replace foreign central banks that had absorbed supply in the 10- to 30-year sector.

Taken together, the changes suggest the nature of US Treasuries as an asset class is shifting. In the past, investors were willing to buy Treasuries even at lower yields than other financial products because they were viewed as safe assets. More recently, however, the sharp increase in issuance has made investors more insistent on extra compensation in the form of higher yields. Ricardo Caballero, a professor at the Massachusetts Institute of Technology, said about 0.75 percentage point of the 2.5 percentage-point rise in US Treasury yields since 2015 reflects investors' demand for additional compensation. Investors are increasingly buying Treasuries to seek returns rather than simply to secure a safe asset, he added.

Kim Joo-wan, Hankyung.com reporter, kjwan@hankyung.com