Updated
Updated · Business Insider · Aug 24
Morgan Stanley Warns $1 Trillion Treasury Buybacks Could Lift 30-Year Yields
Updated
Updated · Business Insider · Aug 24

Morgan Stanley Warns $1 Trillion Treasury Buybacks Could Lift 30-Year Yields

3 articles · Updated · Business Insider · Aug 24

Summary

  • Lisa Shalett said Treasury buybacks meant to cap long-term rates may instead push borrowing costs higher by increasing policy uncertainty for investors.
  • Two-thirds of the recent move in nominal long-term rates has come from rising term premiums, she said, as 30-year Treasury yields hit a 19-year high last week.
  • Treasury Secretary Scott Bessent has doubled the buyback program, and CNBC reported Monday the Treasury could also use its $1 trillion General Account for more purchases.
  • Morgan Stanley expects yields to keep rising anyway, citing the $40 trillion national debt, sticky inflation, defense and energy spending, and private borrowing tied to AI infrastructure.
  • For investors, Shalett recommended benchmark-neutral bond exposure in the 3-year to 7-year range and more equal-weighted, healthcare and financial stocks over AI-heavy indexes.

Insights

Will the Treasury's multi-billion dollar buyback plan accidentally trigger the exact long-term yield spike it was designed to prevent?
If a massive debt load overpowers government market interventions, where can investors hide as structural inflation pushes borrowing costs higher?