The US Treasury is considering deploying $950 billion from its General Account to fund increased purchases of long-term government bonds, according to reporting on the Treasury's bond market strategy.
The General Account, which holds operating balances for federal spending, typically sits between $400 billion and $800 billion. Using it to backstop Treasury purchases would require the account to be drawn down significantly, a step Treasury has avoided in prior years.
Treasury Secretary Janet Yellen's office announced the strategy on August 19th. The actual increased bond purchases are set to begin September 9th, according to the administration's timeline. The Treasury faces sustained high borrowing needs and the administration has made the bond market a top priority.
Long-term Treasury yields have moved higher in recent months as markets priced in fiscal expansion. The administration plans to use the General Account to support bond purchases. Typically, Treasury policy defaults to replenishing the General Account through new borrowing or asset sales rather than drawing it down for market operations.
The $950 billion figure represents the estimated deployment over a specific period, though the Treasury has not specified the duration or the exact tranches of the purchase program. Market participants have been watching for official activity in the long-duration space, where price discovery has tightened considerably.
Using a working capital account to support market operations creates operational risk for the Treasury if spending accelerates unexpectedly or if the administration faces urgent cash needs. The General Account serves as the Treasury's primary checking account for all federal operations, and drawing it below normal operating minimums has historically required coordination across multiple federal agencies and reserve banks.
The Treasury would need to execute the drawdown without triggering sharp reactions in money markets or the overnight reverse repo facility. If the administration deploys the full $950 billion, the General Account could fall to historic lows relative to Treasury outflows, forcing the department to manage its cash position more actively than it has in the past three years.
