U.S. Treasury Allocates Up to $70 Billion to Support Bond Liquidity Next Quarter

Key Facts

On November 4, the U.S. Treasury said it expects to buy up to $70 billion in off-the-run securities to support market liquidity, alongside purchases of up to $25 billion in securities maturing in one month to two years for cash management, during the quarter from November 2026 to January 2027. The two tracks serve different purposes: the first focuses on trading older securities, while the second manages the Treasury’s cash needs through short-term instruments. The department said the announced schedule is preliminary and that it continues to assess potential changes, including purchase limits, operation dates and frequency, eligible securities and execution methods. The figures therefore do not represent fixed final caps for every detail of the program throughout the quarter. The plan is part of the Treasury’s management of its account balances and financing, alongside government debt issuance.

The Treasury estimated that its Treasury General Account balance could peak at $1.025 trillion in late November and late January, with a margin of $50 billion above or below that level, and assumed a balance of $850 billion at the end of December. These estimates provide context for the cash-management component of the buyback plan, as purchases of short-term securities are linked to managing the projected cash balance. In the refunding announcement on November 4, the department offered $125 billion in securities to replace about $97 billion in privately held notes and bills maturing on November 15. The Treasury said the operation would raise about $28 billion in new cash from investors. These figures show the buybacks coinciding with the financing of maturities and new debt issuance, rather than operating separately from borrowing management.

Minutes of the Treasury Borrowing Advisory Committee showed that most market participants reported at least modest improvements in liquidity and market functioning after the larger buyback operations. The minutes quoted them as saying the purchases provided a more reliable outlet for off-the-run securities, reduced the risk of price dislocations and helped stabilize relative-value relationships. The operations’ effect on dealers’ ability to intermediate customer flows varied, however, according to the minutes. Dealers recommended clearer and earlier communication about operations, broader distribution of purchases through per-security limits, and smaller, more frequent operations. These comments reflect market participants’ assessments, while the committee said it had a range of evidence that the program had supported liquidity conditions since its launch in 2024.

In an assessment covering the period from May 29, 2024, to January 22, 2025, purchases reached the maximum available in 68% of nominal coupon operations. Offers with a face value of $92.052 billion were accepted out of $115 billion available during the study period. The assessment said the operations are large relative to trading volumes and dealers’ holdings on the day they are conducted, but more modest relative to overall market volumes and dealers’ holdings. In August, the Treasury raised the per-operation maximum in the 10-to-20-year and 20-to-30-year nominal bond sectors to at least $4 billion, from a previous limit of $2 billion. The change took effect from September 9 through November 4, 2026, the end of the refunding quarter that preceded the new schedule.

The Treasury expected to maintain current benchmark Treasury bill auction sizes through late November, with the possibility of issuing short-dated cash-management bills near the end of the month. It also expected to reduce the shortest auction sizes in December, then increase them across the bill curve in January. In the refunding auction announced on November 4, it offered $58 billion in 3-year notes, $42 billion in 10-year notes and $25 billion in 30-year bonds. The department scheduled these auctions between November 9 and 12, with settlement on November 16, 2026. Also on the near-term calendar is the U.S. October Consumer Price Index release, scheduled for November 10 at 8:30 a.m. local time as listed in the Bureau of Labor Statistics calendar.

The Borrowing Advisory Committee said October’s stock market decline revived some demand for Treasury bonds as a safe haven. By late in the month, the Nasdaq 100 had fallen a little more than 7% from its early-October peak, and the stock decline helped reverse some of the previous rise in yields. In a research note, the Federal Reserve said Treasury issuance strains the intermediation capacity of bond trading desks, while buybacks counteract that effect by reducing inventories and using internal risk limits. The note estimated that every dollar of coupon securities issued by the Treasury is associated with an increase of about 21 cents in dealers’ total balance sheets, based on data through June 30, 2025. The Treasury is scheduled to announce its next quarterly refunding on February 3, 2027.