US Treasury Repurchases $6 Billion in Older Bonds
The operation hit its target, but heavy concentration in few assets draws criticism from Wall Street traders.
The United States Department of the Treasury repurchased $6 billion in older government bonds on November 4. This amount reached the total limit planned for the operation, which aims to improve trading conditions in the government debt market.
Despite the volume, the distribution of assets raised concerns among traders. Just two securities accounted for nearly 98% of the government's total purchase. A single bond was responsible for $4.9 billion, or 82% of the total acquired.
Out of 40 bond options eligible for the operation, the Treasury bought only seven. This scenario reinforces Wall Street's fear regarding the concentration of purchases in a few assets, leaving traders holding securities they had hoped to sell.
Traders argue that increasing the size of operations helps liquidity, but the way the volume is distributed is essential. Older bonds, known as off-the-run, have lower liquidity and are harder to sell without price losses.
Holding these bonds in portfolios creates high costs and exposure risks to market fluctuations for intermediaries. The repurchase program serves as an exit for these assets, but its effectiveness depends on broader coverage in future purchases.
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