U.S. Treasury Secretary Says Bond Buyback Aims to Calm Market Sentiment

U.S. Treasury Secretary Janet Yellen stated that the expansion of the U.S. Treasury bond buyback program last month was intended to quell the "frenzied" sentiment in the bond market and to drive market prices back to equilibrium. Yellen pointed out that while it is impossible to change the market equilibrium price, the goal is to reduce excessive speculation in the market. She mentioned that if investors were truly concerned about U.S. debt credit, they should sell U.S. Treasuries and buy German bonds, but the current market behavior does not reflect this. Yellen denied that the Treasury's bond buyback is equivalent to the Federal Reserve's quantitative easing, stating that the measure is more akin to the Fed's past "twist operations." The backdrop for this expanded buyback program is that the yield on the 30-year U.S. Treasury bond has risen to its highest level since 2007.

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