Citadel Says Expanded US Treasury Buybacks Risk Weaker Dollar, Higher Inflation

Citadel Securities warned that expanding the US Treasury's buyback program could weaken the dollar and fuel inflation, Walter Bloomberg reported on August 24. The firm said the policy may hold down long-term Treasury yields, but would do little to resolve underlying problems such as the large fiscal deficit.

Citadel Securities described the Treasury's expanded buyback policy as a form of "financial repression." Treasury Secretary Scott Bessent is increasing buybacks in an effort to lower long-term Treasury yields.

The firm said that if the Treasury uses its cash holdings and other resources to step up bond purchases, it could push down long-term yields while adding pressure on the dollar and inflation.

Citadel Securities said intervention in the Treasury market alone would not be enough to ease large fiscal deficits and inflation pressure. Lasting rate stability may require fiscal tightening and, if necessary, interest-rate increases by the Federal Reserve, it added.