Bessent's $950B Treasury Account Could Fund Bond Buybacks

The Treasury could use its near-$1 trillion General Account to fund expanded purchases of long-term government bonds, a move that would give Secretary Scott Bessent far more firepower to influence yields, two senior officials said.

"We are trying to keep the market in equilibrium," Bessent said on CNBC, describing the operation as a "Treasury Twist" that could exceed the new $4 billion minimum per buyback.

The Treasury surprised markets Aug. 19 by doubling purchases of off-the-run securities on the long end to at least $4 billion per operation, from $2 billion. The General Account, the government's checking account at the Federal Reserve, holds about $950 billion — well above the $550 billion to $600 billion target under the Biden administration. The 10-year Treasury yield fell about 4 basis points to 4.70 percent after the announcement, though bonds later retreated as analysts questioned the program's scale.

Tapping the account would change that calculus. Officials said a partial drawdown carries no immediate risk, with the next debt-ceiling constraint not expected until winter 2027 or early spring. Even a small deployment, or the mere recognition that the Treasury would use the account, could suppress long-end yields and flatten the curve, easing borrowing costs for rate-sensitive sectors.

The General Account is funded with existing tax collections and sits at the Federal Reserve, which holds it like a bank but does not treat it as a monetary policy tool. Officials declined to say how much, if any, of the account would be used or when an announcement might come, and said its use would not extend beyond the off-the-run purchases outlined last week.

A $950 Billion Rainy-Day Fund

The account's size is discretionary. Under Janet Yellen, the Treasury aimed to hold a balance equal to a "week ahead of cash needs." The current Treasury says it manages the account "consistent with Treasury's long-standing cash balance policy." If Bessent wanted to keep the balance near $1 trillion after any deployment, the government would need to sell additional debt to rebuild it.

Running the account somewhat lower would not appear to pose immediate risk. A smaller balance would leave the government with less cash on hand in a debt-ceiling impasse, but the latest estimates put the next limit crunch no earlier than winter 2027, giving time to rebuild. The last standoff, resolved in mid-2025, forced the Treasury to use "extraordinary measures" to keep paying bills.

Regular and Predictable, Officials Insist

The Aug. 19 announcement came two weeks after the quarterly refunding statement, breaking with the Treasury's long-standing practice of being "regular and predictable" about debt sales. Officials pushed back on criticism that the move amounted to gaming the market, noting the formal auction schedule was unchanged and that the first operation, set for Sept. 9, gives markets nearly three weeks to prepare.

The Treasury also published its full quarterly plan in the Aug. 19 release. Bessent said the intent was to get markets to "focus on the fundamentals and not trade the headlines during a quiet period in a thin market." He expects progress on the deficit as tariff revenue returns after court-mandated refunds are replaced by new tariffs, and said top officials would meet soon to forge plans to improve the fiscal picture.

The potential use of the account also addresses a separate worry among bond investors: that the Treasury might seek Federal Reserve help in such operations. Officials said the Fed holds the account but does not consider it part of its monetary policy toolkit, and no such assistance is contemplated.

If the Treasury deploys even a fraction of the account, the impact could ripple beyond rates. Bitcoin topped $78,000 after markets absorbed the buyback plans, while the 10-year yield's slide to 4.70 percent has eased pressure on rate-sensitive equities and mortgage-linked assets. A flatter curve would lower refinancing costs for corporates and support longer-duration assets, though it would compress bank net interest margins that benefit from a steeper curve.

This article is for informational purposes only and does not constitute investment advice.