Treasury Secretary Scott Bessent speaks to members of the media in front of the White House on August 20, 2026 in Washington.
Yuri Gripas Abaka | Bloomberg | Getty Images
The Treasury Department could use nearly $1 trillion in the general fund to finance its recently announced plan to increase its bond purchases, according to two senior Treasury officials.
Using the TGA would give the Treasury significant power to influence long-term bond yields. The Treasury Department surprised the market last week by announcing it would double the size of its long-term off-the-run securities repurchases from $2 billion to at least $4 billion. Treasury Secretary Scott Bessent said on CNBC that such operations could be even larger than the new cap.
However, the Ministry of Finance did not say how it would finance the purchase. Most market participants expected this to occur through the sale of short-term securities. Treasury officials did not rule out that possibility. In an interview with CNBC, Bessen called the operation a “treasury twist,” referring to the government and Federal Reserve operations that buy long-term government bonds and pay for them with short-term issuance. This also suggested that short-term bonds would be sold.
But since the surprise announcement, bond prices have retreated from their initial gains and yields have risen. This is partly because many market analysts are skeptical about how effective the operation will be and whether Treasury resources are too limited.
Using TGA may change that perception. The TGA is essentially a government checking account, a type of emergency fund held by the Federal Reserve. That money is already coming from existing tax collections. Mr. Bessent has currently built up the TGA to about $950 billion, but the target goal under the Biden administration is about $550 billion to $600 billion.
Officials did not say how much, if any, TGA would be used or when such an announcement would be made. There was no implication that it could be used for anything other than buying off-the-run securities, which was the focus of last week’s announcement.
But it was clear that it was considered available.
We don’t need the Fed’s help.
The size of the TGA is arbitrary. When Janet Yellen ran the Treasury Department, officials said their goal was to set the TGA “one week ahead of cash needs.” The current Treasury Department says the account is set up “consistent with Treasury’s long-standing cash balance policy.” If any of that is spent, and the Bessent Treasury wants to stay close to $1 trillion, it would need to sell additional bonds to get that money back.
But setting it somewhat lower doesn’t seem to pose any immediate risk. Reducing the TGA means the government will have fewer cash reserves if the new debt ceiling is reached. But the latest forecasts suggest new limits won’t be reached until next winter, and perhaps early spring. This will give you time to build a backup if needed. Bond yields, on the other hand, could be affected by even modest use of the TGA or even the perception that the Treasury will use the TGA to purchase government bonds.
It would also quell concerns expressed by some bond market participants that the Fed could be asked to assist the Treasury in such operations. (The Fed owns the TGA like banks, but does not consider it part of its monetary policy toolkit.)
US 10-year Treasury yield, year-to-date
Treasury officials pushed back against criticism that the Treasury Department was misleading the market with its sudden announcement, abandoning a long-standing practice of calling bond sales “regular and predictable.” The announcement of enhanced stock buybacks came two weeks after the announcement of quarterly refunds, which would normally convey such information to the market.
However, senior officials said there was no change to the actual official auction schedule. He added that the announcement came about three weeks before the first operation took place on September 9, giving the market time to prepare. The Treasury Department also announced plans for the entire quarter in its Aug. 19 announcement.
He added that the first round of bidding is not scheduled until September 9, so it is too early to judge the impact on the market.
Bessent told CNBC last week that the Treasury’s intention was to keep the market “focused on the fundamentals and not trade headlines during slow periods when the market is down. So we’re trying to keep the market balanced.”
He said he expected the deficit to improve if court-ordered refunds were replaced with new tariffs and tariff revenue returned. He also said senior government officials would meet soon to develop a plan to improve the fiscal situation.
