MeidasTouch co-founder Ben Meiselas sat down with MeidasTouch Chief Economist Justin Wolfers of Platypus Economics to unpack a major move by the U.S. Treasury that’s going under-the-radar, and what it could mean for the economy and your wallet.
The Treasury announced it is at least doubling the size of certain long-term government debt buyback operations, from $2 billion to $4 billion per operation. The announcement came as long-term Treasury yields had been surging.
Wolfers explains that the bigger story is America’s rapidly growing debt and unusually large budget deficits. As the federal government competes for enormous amounts of borrowed money, interest rates can rise across the economy, potentially making mortgages, car loans and credit card debt even more expensive for everyday Americans.
As for the Treasury’s latest intervention, Wolfers says there are two possible explanations. It could simply be a technical effort to keep parts of the Treasury market functioning smoothly, something that would normally attract little attention. Or the administration could be using the program more aggressively to try to push down long-term interest rates as markets send warning signals about America’s fiscal trajectory.
Right now, Wolfers says, we don’t know which explanation is correct. And that uncertainty is itself part of the problem.
Watch Ben’s full conversation with Justin Wolfers above as they break down what is happening in the bond market, why it matters, and what Americans should be watching next.
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