Citadel Securities, one of the largest market-making firms on the planet, just lobbed a grenade at the Treasury Department’s playbook. In a client note authored by Nohshad Shah, the firm labeled the government’s expanded bond buyback program a form of “financial repression,” warning it could weaken the dollar and fan inflationary pressures at exactly the wrong time.
The critique lands as Treasury Secretary Scott Bessent doubles down on a strategy that looks increasingly like a high-wire act: buying back long-dated bonds to suppress yields while funding those purchases with short-term debt.
What the Treasury is actually doing
The Treasury doubled the cap on liquidity-support buybacks for 10- to 30-year securities from $2 billion to at least $4 billion per operation, a policy running through November 4. That change could allow for roughly $14 billion in additional buyback volume.
The strategy resembles what bond market veterans call an “Operation Twist,” a technique the Federal Reserve deployed in 2011 to push down long-term rates by selling short-term securities and buying longer-dated ones. Except this time it’s the Treasury running the show, not the Fed.
