Treasury Secretary Scott Bessent is set to reveal the size of the next bond buyback operation on Wednesday, with Wall Street dealers on edge about the potential scale of intervention. The Treasury Department is expected to announce the size of Thursday's operation to repurchase outstanding 10-year to 20-year securities, following the August 19 surprise announcement that doubled buyback sizes from $2 billion to at least $4 billion. As reported by Bloomberg, Bessent has characterized the initiative as aimed at cooling 'this fever that was building' in the market, in an apparent reference to a selloff that last month sent longer-dated yields to the highest levels in years. The intervention plan addresses the critical question of whether financial markets can handle both bloated US debt and spiraling AI borrowing from major hyperscalers, with the Treasury potentially using funds from its Treasury General Account to purchase long-term government bonds.
AI-related capital expenditure accounted for 1.02 percentage points, or 48%, of US real GDP growth in the four quarters through the second quarter of 2026. The five hyperscalers, including Oracle, issued $223 billion of bonds so far this year, compared with $108 billion in 2025, with Alphabet alone raising $29 billion in August. Credit spreads have widened significantly, with spreads over Treasuries for Amazon, Alphabet and Meta rising to 85 basis points, 75 basis points and 106 basis points respectively, from 60 basis points, 51 basis points and 80 basis points in early June. According to Investing.com India, the upside surprise in issuance has been driven by three main factors: hyperscalers raising capex guidance aggressively, SpaceX's unexpected bond issuance despite recent equity raises, and semiconductor companies bringing large deals to market despite modest funding needs relative to expected operating income.
The upcoming announcement comes just hours before the department's next sale of 10-year notes and a day before a 30-year bond auction, amplifying the immediate consequences of Wednesday's news. As reported by Bloomberg, 10-year yields, which are key for US mortgage rates, are now even higher than last month's levels, with stakes high given the current market conditions. A buyback operation of just $4 billion could prove a disappointment to investors, adding to selling pressure in the world's biggest bond market. However, opting for a giant total — Morgan Stanley calculates $10 billion as a practical cap — could set a new baseline for subsequent longer-dated buybacks. Wrightson ICAP estimates that boosting buybacks to $6 billion per operation would cut quarterly net issuance in the 20-year-plus sector by about 27%, while taking them to $10 billion each would slash supply by roughly 55%.
Inflation increasingly appears to be settling in the 3%-4% range, with US nominal GDP growth running at a trend rate of 5.7% year-on-year over the past 12 quarters and rising 6.6% in the second quarter of 2026. The report noted that faster nominal growth points to higher long-term bond yields ahead. The next monthly inflation report, due on September 11, has become particularly important following Kevin Warsh's hawkish speech at Jackson Hole, where he noted that 54% of the 199 individual components in the PCE basket had recorded price increases above 3% over the past year, compared with an average of 32% in the two decades before the pandemic.
According to The Economic Times, Jefferies pointed to the contrast in Singapore, where the Straits Times Index rose 23.7% year-to-date, while the Singapore REIT index fell 9%. The report saw potential opportunities in Singapore REITs, noting that the estimated 2026 dividend yield for the sector rose to 6.3%, while the Singapore 10-year government bond yield was 2.37%, leaving a 3.9-percentage-point spread. Jefferies remains constructive on gold while treating the bond market as a structural rather than temporary problem, suggesting investors should prepare for a prolonged repricing of bonds, currencies and interest-rate-sensitive assets. As Investing.com India notes, while US tech issuance may be creating localized indigestion across US fixed-income markets, strong investor appetite has remained sufficient to absorb the increase in issuance, with net US investment-grade corporate supply expected to reach a new all-time high this year.
