US Treasury could tap the nearly $1 trillion TGA to fund bond buybacks
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According to CNBC, the US Treasury is considering using its Treasury General Account (TGA), the government’s cash account at the Federal Reserve, currently holding nearly $1 trillion, to help finance its recently announced purchases of longer-dated Treasury bonds.
Markets initially assumed the Treasury would fund the bond-buying program by issuing more short-term bills, consistent with Treasury Secretary Bessent’s description of the operation as a “Treasury Twist". However, senior Treasury officials indicated that the TGA is also available as a funding source and did not rule out using it.
Using the TGA would significantly increase the Treasury’s ability to influence long-term yields because the funds are already available from tax receipts and do not require new debt issuance. This could address market skepticism about whether the buyback program is large enough to meaningfully lower yields.
Officials did not specify how much of the TGA might be used or when a decision could be announced, but they emphasized that the option is on the table. Since the TGA balance is well above the levels maintained under the previous administration, the Treasury has room to draw it down without creating immediate funding risks.
This looks like another “verbal" intervention to suppress the rise in long-term Treasury yields after they reversed the drop following the buyback announcement on Wednesday. This is supportive for the 'debasement’ trades (long gold, bitcoin and short US dollar), and could make the Jackson Hole event even more interesting.
This article was written by Giuseppe Dellamotta at investinglive.com.