American financier and investor Stanley Druckenmiller commented on the US Treasury Department's plan to increase the volume of long-term bond buybacks. In his note for the WSJ, he called this approach a mistake, criticizing the department's intervention as such.
Recall that the US Treasury announced an increase in the volume of buybacks for bonds with maturities from 10 to 30 years on August 19, 2026. The amount was raised from $2 billion to $4 billion.
This factor, along with US President Donald Trump's call to approve the framework bill (CLARITY), served as one of the catalysts for growth in the crypto market. For example, macro strategist Mark Conners believes the Treasury's decision could push Bitcoin to the $180,000 level.
Despite the overall positive effect for high-risk assets in general, Druckenmiller pointed to potential risks. According to him, the Treasury failed to achieve its stated goals - to reduce bond yields and slow the growth of public debt.
Immediately after the announcement, interest rates did fall, but the next day they recovered and rose even higher. At the same time, there were no prerequisites for intervention, the expert is sure.
According to Druckenmiller, this market was not "broken," yields rose because its participants reassessed US fiscal policy and began demanding more. That is precisely why the Treasury's attempt to intervene did not yield results, and interest rates rose even higher, he believes.
The expert provides the following arguments:
- there were no liquidity problems. Trading was normal, auctions were not disrupted, and banks were not under stress. The Treasury responded to rising yields;
- such interest rates were justified by fundamental factors. Among them: high inflation, low unemployment, a deficit of about 6% of GDP, the debt size exceeded $40 trillion;
- bond yields are a mechanism for the market to pressure Congress. As long as the government can borrow cheaply, politicians have little incentive to cut the deficit and reform social spending. If the Treasury artificially suppresses rates, it makes it easier for them not to change anything;
- this is a dangerous precedent. The expert questions what the "ceiling" of the Treasury's program is. Once the market decides the Treasury is protecting a certain rate level, it will constantly test it, he believes;
- such a move by the department resembles the Fed's quantitative easing. The Treasury buys long-term securities and essentially replaces them with shorter-term debt. But such actions are not taken during high inflation.
What Should Have Been Done?
The billionaire is sure that the correct step would have been to allow the market to dictate bond yields, lowering them by reducing the deficit. In Druckenmiller's opinion, these securities could have traded even higher, up to 5.5%.
The Treasury's intervention, in turn, not only yielded no results but also created additional risks:
"Governments that protect prices from fundamental factors always lose. [...] Rising interest rates are a signal of coming problems, and artificially suppressing them only increases the danger," he summarized.
Note that immediately after the sell-off following the Treasury's buyback announcement, the yield on 30-year bonds recovered to 5.27%, but then fell again to 5.2%.
Earlier, we covered the opinion of billionaire Ray Dalio. He has repeatedly stated the growing risk of a US debt crisis, urging investment in gold and bitcoin.
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