Treasury Buybacks Fail to Curb Yields as $40 Trillion US Debt Alarms Economists
Updated
Updated · The Atlantic · Aug 26
Treasury Buybacks Fail to Curb Yields as $40 Trillion US Debt Alarms Economists
3 articles · Updated · The Atlantic · Aug 26
Summary
Long-term Treasury yields rose above pre-buyback levels about 24 hours after the Treasury more than doubled its longer-dated bond buybacks, blunting a brief drop.
The rebound reflects a deeper shift: economists once relaxed about deficits are turning hawkish as the average interest rate on U.S. debt climbed to roughly 3.4% from about 1.5% in 2021.
Investors are demanding higher compensation for holding long-dated Treasurys as persistent deficits, elevated rates and heavy credit demand—including from AI investment—make U.S. debt look riskier.
Washington has shown little appetite for the main debt remedies of higher taxes or lower spending, even after the national debt hit $40 trillion and a major ratings agency downgraded U.S. credit last spring.
Higher long-term yields feed directly into household borrowing costs, with economists warning the era of 2% to low-3% mortgages is likely over if debt and rates keep rising.