Citadel Securities says Treasury bond buybacks are a form of "financial repression"

Citadel Securities stated that the Treasury's bond buybacks aimed at suppressing long-term borrowing costs essentially constitute "financial repression," posing risks of weakening the dollar and pushing up inflation. Treasury Secretary Scott Besant expanded the buyback program last week after long-term Treasury yields climbed to their highest levels in years. On Monday, CNBC reported that Besant might use the Treasury's General Account—which is its cash balance at the Federal Reserve—to fund the purchase operations. According to Citadel Securities, this intervention could shift market fears about fiscal outlook and inflation from the bond market to the currency market—since falling yields would reduce the dollar's appeal and may push up import prices. Nohshad Shah, Citadel Securities' EMEA Head of Fixed Income Sales, wrote in a client report: "More broadly, this at the margin constitutes financial repression. Stopping Treasuries from clearing at lower prices does not eliminate the pressure; it simply moves it elsewhere." Besant's decision to at least double the scale of buyback operations for 10-year to 30-year Treasuries indicates that the government is uneasy about persistently high long-term yields, Shah said. However, this measure has so far provided limited support to the market—the 30-year Treasury gave up its gains just one day after the announcement. Meanwhile, the dollar weakened and gold rose.