JPMorgan: Treasury buybacks may ease long-end strains but won't fix mounting $40T debt supply

JPMorgan says the U.S. Treasury's expanded bond buyback program may help relieve stress in long-dated Treasuries, but it does little to address the underlying challenge of rising government borrowing. James Sullivan, JPMorgan's co-head of global fundamental research, said Treasury Secretary Scott Bessent's approach effectively swaps part of the market's longer-duration exposure for more short-term funding. The shift can bolster liquidity, but it leaves investors confronting a growing pipeline of issuance. The comments come as U.S. federal debt has climbed above $40 trillion and bond issuance remains heavy globally across sovereign and corporate markets. Treasury to boost buybacks The Treasury Department said it will at least double its liquidity-support buybacks for 10- to 30-year securities, lifting the maximum purchase size from $2 billion to at least $4 billion per operation between Sept. 9 and Nov. 4. Treasury emphasized the initiative is designed to improve liquidity in older issues, not to cut overall federal borrowing. Bessent also said the buybacks could be increased further if market conditions warrant. The policy arrives as swings in Treasury yields continue to shape equity valuations, mortgage rates and broader financial conditions, according to BofA Global Investment Strategy. Debt supply tests demand Sullivan's larger focus is supply. China's holdings of Treasuries have dropped to the lowest level since 2008, and other major foreign holders have also reduced exposure. Separately, developed-market government debt is projected to reach about $75.8 trillion in 2026. Corporate bond issuance is also rising as companies fund AI infrastructure, data centers and reshoring projects. With more borrowers competing for capital, issuers may need to pay higher yields. That, in turn, could make fixed income more competitive with equities, especially with stock valuations already elevated. Recent market moves have repeatedly underscored how sensitive growth stocks are to changes in bond yields.