US Expands Treasury Buyback, Causing Market Turmoil and Potentially Repeating Japan's Currency Depreciation

The United States has announced an expansion of its Treasury buyback program, leading to significant market turbulence as investors compare it to Japan's policies. Japan previously maintained a long-term weak yen by lowering borrowing costs. The dollar is currently at a three-month low and is set to record its worst weekly performance this month. The U.S. Treasury unexpectedly announced it would double the size of its buyback of longer-term Treasuries. Robin Brooks, a senior fellow at the Brookings Institution, stated that this move is a clear sign of the U.S. heading towards currency depreciation, claiming that the U.S. government is "playing with fire." U.S. Treasuries initially rose following the announcement but later retraced their gains. Prices for gold and other precious metals increased. Steven Barrow, head of G10 strategy at Standard Chartered Bank, pointed out that lowering bond yields through buybacks will only further pressure the dollar and will not resolve the yield increase caused by the fiscal deficit.

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