Bessent could tap near $1 trillion Treasury General Account to fund bond buybacks, sources said

• The TGA has been built up to around $950 billion under Bessent, compared to a $550-$600 billion target under the Biden administration, providing substantial funds for bond purchases
• Treasury surprised markets by doubling buyback size to at least $4 billion, but the impact was short-lived due to skepticism about available resources to fund the program
• Using the TGA would avoid selling short-term bills to fund purchases and eliminate concerns about Federal Reserve involvement in the bond-buying operations

Summary

Treasury Secretary Scott Bessent may utilize the Treasury General Account (TGA) to fund expanded government bond buyback operations, according to senior Treasury officials. The TGA currently holds approximately $950 billion, significantly above the Biden administration's target of $550-$600 billion.

Key Developments:

Last week, Treasury surprised markets by doubling bond buyback operations from $2 billion to at least $4 billion in off-the-run securities on the long end. However, the initial bond rally proved short-lived as investors questioned the Treasury's funding capacity and effectiveness.

Funding Mechanism:

Using the TGA would provide substantial firepower to influence long-term yields. The account, essentially the government's checking account held at the Federal Reserve, is funded through existing tax collections. While Treasury initially suggested funding purchases through short-term bill sales (a "Treasury Twist" operation), officials confirmed the TGA remains available as a funding source.

Market Implications:

Tapping the TGA could address market skepticism about available resources and potentially impact bond yields even with modest usage. The 10-year Treasury yield currently stands at 4.70%. Officials stated the Federal Reserve would not be involved in these operations.

Timeline and Risks:

The first buyback operation is scheduled for September 9, 2026. Drawing down the TGA would reduce cash reserves during potential debt-ceiling negotiations expected winter 2027, though officials believe time exists to rebuild the account if needed.

Treasury officials defended the surprise announcement, noting it came three weeks before implementation and didn't alter official auction schedules. Bessent emphasized the strategy aims to keep markets focused on fundamentals rather than headlines during thin trading periods.