Buybacks have to be funded with new issuance. All Bessent can do is delay it. That’ll increase the risks of the coming Debt Ceiling.
By Wolf Richter for WOLF STREET.
So that didn’t take long. Bessent’s Hocus-Pocus 3 came this morning, put into the world by CNBC, citing as sources two unnamed “senior Treasury officials,” with this headline today: “Bessent could tap near $1 trillion Treasury General Account to fund bond buybacks, sources said.”
And the news spread from there with various headlines. But let me ask you this: Where else is the money for the buybacks supposed to come from?
The Treasury General Account (TGA) is the only checking account that the US government has. Every single dollar that the government spends on anything comes out of the TGA, and so the government “taps” the TGA to send you your tax refund, pay for military salaries and hardware, pay off maturing bonds, etc. And every single dollar that the government takes in from taxes and Treasury auctions goes into the TGA. Treasury must “tap” the TGA for every dollar it spends. Where else is the money for the buybacks supposed to come out of? A cookie jar?
The implication is that Treasury doesn’t have to sell T-bills (Treasuries maturing in 1-12 months) to fund these buybacks, but that it can just draw down the balance in the checking account.
Huge amounts of funds run through it every day. For example, the week Treasury sold $742 billion in securities at auctions generated $742 billion in inflows as those transactions settled. And as hundreds of billions of securities mature every week and have to be paid off, it generates huge outflows, which is why the balance has to be large enough to provide enough of a buffer to handle these massive and seasonal flows.
In its Quarterly Refunding Statement on August 5, Treasury said this about the TGA balance:
“Treasury is assuming a $950 billion cash balance at the end of September. However, based on current projections for the upcoming refunding quarter, Treasury estimates that the size of the Treasury General Account (TGA) could peak at $1.05 trillion (plus or minus $50 billion) in late October. This figure is consistent with Treasury’s long-standing cash balance policy and is driven by the large outflows expected to occur at that time.”
Sure, the government can draw down the TGA, as it does periodically, but eventually it has to refill the TGA through rapidly increased debt issuance.
And the debt ceiling is coming. The government will hit the debt ceiling of $41.1 trillion late this year or early next year, and unless Congress immediately raises it, the government will have to draw down the TGA to fund the deficits that come at it at a pace of $1 trillion every 3-5 months. And if Congress fails to raise the debt ceiling for long enough, Treasury will then draw down the TGA all the way to the last moment before it runs out of money.
There are currently $936 billion in the TGA. Note the periods of the debt ceiling when the TGA gets drawn down to precarious levels – and occasionally, such as in 2023 and 2021, to nerve-wracking levels, with the government essentially out of money before the debt ceiling gets resolved, followed by massive issuance of Treasury securities to refill the TGA.
And if it draws down the TGA in September and October to fund the Treasury buybacks, just before hitting the debt ceiling, it will have less cash left to bridge the debt ceiling debate, and less time left before it runs out of cash during the debt ceiling. And then when it’s resolved, Treasury has to issue $2 trillion in new debt in all haste within a few months to refill the TGA and fund the deficits.
We just went through this in 2025. In the six months after the debt ceiling was resolved at the beginning of July 2025, Treasury added $1.8 trillion to the publicly traded Treasury securities. Have these people at CNBC already forgotten?
There is simply no escape: Buybacks have to be funded with new issuance. All Bessent can do is shift the timing around a little, but that would increase the debt ceiling risks.
CNBC, always eager to carry manipulative stuff from sources, is just regurgitating Bessent’s effort to push down long-term Treasury yields by hook or crook. We have started to call them Bessent’s Hocus-Pocus shows, and we are now numbering them to keep track of them. This is #3.
The prior two Hocus-Pocus shows so far in August:
- Hocus-Pocus 1: joint US-Japan yen intervention, confirmed on August 3.
- Hocus-Pocus 2: announcement of doubling of the Treasury buybacks on August 19.
None of these hocus-pocus shows address the actual issues that the bond market faces: A flood of new debt coming at it at a pace of $1 trillion every 3-5 months that it must absorb come hell or high water; inflation; and rising uncertainty. Bessent’s hocus-pocus shows, instead of addressing the issues, just contribute to that uncertainty.
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Meanwhile, in the August 22, 2026, edition of the New York Times, an opinion piece floats the idea of canceling the U.S. federal debt.
“ An Ancient Sumerian Solution to Our $40 Trillion Deficit.”
God help us.
The word for that would be DEFAULT.
In the meantime, short term trading opportunities (eg using TLT) abound!😊
noticed that tlt is scraping the bottom, low going back to 2002…somethings broken and its crazy
Careful, we are one bad unemployment report from having the 10y yield drop 50bp. Too risky for my blood.
If the debt ceiling is reached after January, it may be a perfect setup for the next scapegoat.
Spend it while you got it. Planes, pools, ballrooms, golf, bond buybacks……
Thanks again for bringing this information to the masses. I primarily read you instead of watching Netflix dramas. It is far more interesting.
Bessent is getting less lift which each “show of force”.
I suggest he take a few weeks off and watch some World Poker Tour. He needs to learn how to bluff.
Bessent is Mr. Bluster today and is practicing his new approach on Iran:
Trump launches ferocious ‘economic onslaught’ on Iran to cripple its economy after bombing campaign and peace deal stalls… with chilling warning to China
The Trump administration unveiled its ‘economic D-Day’ plan intended to decimate Iran’s already teetering monetary environment with what has been dubbed the ‘toughest sanctions in history.’
So if the treasury buys, say, $50 billion in T-Bills to pay off $50 billion they earlier ‘borrowed’ in the past, why isn’t that earlier $50 billion subtracted from the country’s debt total?
Every buyback is subtracted and every new issuance is added. In your example, the effect is nil. This goes by actual securities outstanding. When securities are bought back, they’re no longer outstanding, and they get removed at face value from the debt.
Thank you, Wolf!
One thing for sure though, seeing them tripping over their own dxxk over and over again has been quite amusing…I guess gaslighting the public with hocus pocus is much easier on the public than the bond market. Who would’ve thought especially since the bond market has been wrong so many times before and was a asleep for quite a while too…
MarketWatch ‘thinks’ that single US government checking account at the Federal Reserve is some kind of a ‘rainy day fund’ and laughably went on to say ‘Bessent tapping Treasury’s rainy-day fund for buybacks isn’t a ‘bazooka’ to get markets to move his way.’
MW: Dow rises but S&P 500, Nasdaq decline; oil prices dip after ‘Operation Outcast’ announced against Iran
Away all morning but just checked in with CNBC to see if Bessie had released info about the war sanctions and tariff wars. Then immediately left for Wolfstreet to see what is really going on.
Thanks for this. What jumped out to me is the eventual reliance on the debt ceiling chickenout race. Diversionary drama and then someone else’s fault.
I would hope someone in the loon bin reads this site and passes on the info. Then maybe they’ll stop talking. That would be nice, but then what would they trade on?
It’s beginning to look intentional. Juice btc for his boss? Force a crisis?
I guess I sort of thought, even though he’s a conspiracy theorist and a fantasist, that he was actually sort of smart in other ways. Guess we’ll find out in the tell all book in 2.5 years
E –
Before picking everyone’s pocket, one must first create chaos and lots of it! That is my best guess.
The Antideficiency Act and 1st Amendment petition fir redress of grievances.
“The secretary of the treasury is a Level I position in the Executive Schedule,[3] thus earning the salary prescribed for that level ($250,600 as of January 2024).[9]” Reference: Wikipedia.
“The Antideficiency Act prohibits federal employees from[:]
making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. 31 U.S.C. § 1341(a)(1)(A).
involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. 31 U.S.C. § 1341(a)(1)(B).” Reference: US Government Accountability (GAO) website (gao.gov).
While a citizen may not have court standing; The First Amendment of The Constitution provides that the citizens have a right to petition Congress for “a redress of grievances.”
That Congressional redress of grievances is the answer right there.
Howdy Youngins. Houston we have a problem. Come in Houston, Come in Please, Houston come in, Houston we have a problem, come in please.
Mean while at squirrels anonymous , laughter and party times are continuing as sober and drunken sailors continue telling about their resent purchases… Party on folks… Life is so good…..
Don t worry, Your Govern ment loves you. HEE HEE. Sorry Lone Wolf. Gonna have the time of my life this time around…..Bring back the 70s and 80s every which way. Some of US are ready and waiting……
DFB
Bessent getting ready for Hocus Pocus 4 to decommission Iran and dozens of its trading partner form the Dollar system. So the $300B theft of Russian assets was just for starters. If Bessant isn’t trying to destroy the Bond market, he is certainly doing a very good imitation of doing so.
“And if it draws down the TGA in September and October to fund the Treasury buybacks, just before hitting the debt ceiling, it will have less cash left to bridge the debt ceiling debate, and less time left before it runs out of cash during the debt ceiling. ”
I’m guessing that’s the point. Thanks to any buyback by Bessent, the debt ceiling debate would have to happen right around the November midterm elections, instead of possibly occurring afterward. Now, let’s think of some reasons why Republicans would want to pick that timing?
That’s because any “deal” would be made within a Republican majority instead of a possible Democrat majority that might be in place by early January. They are spending that money just to obtain political advantage.
Government spending money it borrowed in order to loan it back to itself?
Like a dog chasing its tail.
Or a hocus pocus shell game.
And congress like they always will will vote to increase the debt ceiling and the circus will go on. This is getting entertaining.
President Trump addressed the imminent threat if Iran attained a nuclear bomb. No one seems prepared to address the imminent threat the national debt and government spending poses to national security. That time bomb could be much more dangerous than Iran and could in the not too distant future cause economic collapse. We need a balanced budget amendment to solve the problem before it is too late. We need to take a scalpel to government spending. Interest rates must go higher to help curb government spending. No one wants to hear that. Trump must act on reducing government spending instead of asking for lower interest rates or he will have a failed presidency, though he arguably has done many good things that he doesn’t receive credit. It is obvious Congress has no intention of curbing spending. Internal enemies have gained much influence and power in recent years. That is where we better turn our attention if we wish to remain a free republic.
Anybody care for a little Gold?
Wolf, do you have an idea of where they want to see the 10 and 30 Year yield at to shut them up?
Question Everything
Quality Entertainment
Quick Eats
Quiet Evenings…..
Am I forgetting something here??? 😁