Druckenmiller criticizes Treasury’s $4 billion bond buybacks
Stanley Druckenmiller criticizes Treasury Secretary Scott Bessent’s decision to double 10- to 30-year bond buybacks from $2 billion to at least $4 billion per operation.
Billionaire investor Stanley Druckenmiller is sharply criticizing Treasury Secretary Scott Bessent ’s recent decision to double long-dated bond buybacks, characterizing the move as an artificial suppression of yields and urging policymakers to “let the bond market speak.” ‘Price Management,’ Not Liquidity Support On Aug.
19, the Treasury Department announced it would increase buybacks in the 10- to 30-year sector from $2 billion to at least $4 billion per operation.
The announcement came shortly after the 30-year yield reached a 19-year high.
Druckenmiller argues in The Wall Street Journal ‘s op-ed that this is a dangerous intervention in a normally functioning market. “This wasn’t liquidity management, it was price management,” he wrote, noting that trading was orderly, volatility was contained, and the market lacked any genuine dysfunction that would justify such official action.
Read Also: Scott Bessent Predicted a Potentially Gold-Backed Renminbi in 2023: Now, China Has Quietly Acquired ‘Far More Gold’ Than Reported A “Subsidy to Procrastination” Druckenmiller warns that artificially lowering rates hides the true cost of America’s fiscal trajectory.
He pointed out that the national debt has crossed $40 trillion, with a deficit running near 6% of GDP at full employment.
Calling the long-term Treasury yield the “only fiscal disciplinarian the U.S. has left,” he stressed that “every basis point of artificial yield suppression is a subsidy to procrastination.” Suppressing rates, he argues, sugarcoats interest-cost projections and allows politicians to delay necessary entitlement reforms.
Paying the Market’s Invoice Rather than managing yields, Druckenmiller insists the Treasury should return buybacks to small, scheduled liquidity operations and focus on addressing the primary deficit. “If the 30-year must trade at 5.5% to clear, that isn’t a crisis.
It is an invoice,” he stated.
He concluded by cautioning that governments attempting to defend prices against economic fundamentals inevitably lose.
How Have Stocks and Bonds Performed? At the last check, the 30-year Treasury bond yielded 5.23%, the 10-year Treasury bond was at 4.70%, and the two-year bond was at 4.24%.
The primary ETF specifically tracking the long end of the U.S.
Treasury yield curve—including the 30-year benchmark bond—is the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT ), which closed 0.62% higher at $82.56 on Monday.
It was down 6.03% year-to-date, down 0.83% over the last month and 5.16% over the last year.
The S&P 500 index has advanced 11.58% year-to-date.
Similarly, the Nasdaq Composite index was up 11.81%, and the Dow Jones gained 10.41% YTD.
On Monday, the SPDR S&P 500 ETF Trust (NYSE: SPY ) and Invesco QQQ Trust ETF (NASDAQ: QQQ ), which track the S&P 500 and Nasdaq-100, respectively, closed lower.
The SPY was down 0.29% to $763.47, while the QQQ declined by 1.00% to $706.32.
Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA ), ended 0.27% higher at $533.65.
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