Dollar weakness expectations reignite as U.S. Treasury expands long-term debt buybacks
MacroDigital Finance
The U.S. Treasury's announcement that it will expand buyback operations for older, longer-dated securities has reignited expectations of a weaker dollar in foreign exchange markets. On the 19th, the Treasury said it would temporarily double the size of each buyback from 2 billion dollars to at least 4 billion dollars, and the following day Treasury Secretary Bessent said the amount could exceed 4 billion dollars. Some see the move as aimed at easing upward pressure on long-term interest rates, and Scotiabank's Shaun Osborne noted that the cost must be paid either through higher yields or a weaker dollar. Deutsche Bank's George Saravelos likened the effect to the Federal Reserve's Operation Twist from 2011 to 2012, and said that encouraging foreign central banks to use the repo facility amounts to mild financial repression. Meanwhile, CIBC Capital Markets' Sarah Ying called it a mini version of past dollar squeeze episodes, and Standard Chartered's Steve Englander warned that stopgap measures risk losing credibility.
