Gold rose while silver slipped on Monday after CNBC reported that Treasury Secretary Scott Bessent could tap a $935 billion cash pile to fund bond buybacks, pushing long-term yields lower.
The department could draw on the Treasury General Account to fund buybacks of higher-yielding older securities, CNBC reported Monday, citing two senior Treasury officials.
The TGA, essentially the government’s checking account at the Federal Reserve, stood at $935 billion as of Aug. 20. Bessent called the operation a “Treasury Twist” in a CNBC interview, a reference to buying long-term bonds funded by short-term issuance.
The officials would not say how much, if any, of the TGA would be used. The report follows Bessent’s decision last week to double buybacks on the long end from $2 billion to at least $4 billion. Gold climbed 1.2% as of 12.30pm in New York, near a four-month high around $4,719 an ounce.
The 10-year Treasury yield fell as much as four basis points to 4.69%, and the all-important 30- year dropped to around 5.215%. Yields are slightly lower, however they remain near the levels that prompted the Treasury to intervene last week, when the 30-year touched a 19-year high above 5.27%.
Silver is down around 1% on the day, as price consolidates below the $70 resistance level. Silver has outrun gold in August, up almost 20% on the month vs gold’s 15%.
Copper gained a modest 0.46% and trades just below its all-time highs.
Another Band-aid
Monday’s Treasury move drew skepticism from Blake Gwinn, head of US rate strategy at RBC< Capital Markets, who called it “a very slapdash attempt to try to stem the selloff” and put the odds of the department actually using the cash at “very, very low,” Bloomberg reported.
The Treasury expanded its buyback program last week after long-dated yields hit multi-year highs, a move that provided only temporary relief as the 30-year yield erased the gains within a day. The week ahead will test investors, the Fed and the Treasury.
Fed Chair Kevin Warsh delivers his first Jackson Hole speech Friday, and July PCE data lands Wednesday, with economists surveyed by Bloomberg forecasting about 3.6% headline and 3.3% core year-over-year.
The Treasury will have it’s eyes firmly glued to long term rates.
(With files from Bloomberg)
