The US dollar held near three-month lows on August 25 as concerns persisted that the Treasury Department’s expanded bond buyback program could further weaken the currency even as it attempts to stabilize the bond market. The dollar index edged up to 99.0 on Monday but remained near its August 21 low, when it fell to a three-month low against the euro on mounting worries about the buyback plan.
Treasury Secretary Scott Bessent announced on August 19 that the department would at least double the size of its government debt repurchases, raising the maximum buyback operation from $2 billion to $4 billion per transaction. The move targets longer-dated debt—the 10- to 20-year and 20- to 30-year segments—where yields had surged to levels unseen in nearly two decades amid heavy issuance, geopolitical tensions tied to the Iran conflict, and deteriorating fiscal concerns.
Yields initially fell sharply after the buyback announcement, with the 10-year note closing down 5.7 basis points to 4.647% and the 30-year bond tumbling 9 basis points to 5.196%. However, the strategy has not achieved its primary goal of holding yields down, as long-dated yields have since climbed back higher. The 30-year yield had reached its highest level since 2007 before the announcement.
Marc Chandler, chief market strategist at Bannockburn Global Forex, captured the market’s skepticism in a Reuters interview: “Bessent’s efforts to suppress U.S. yields haven’t done much for U.S. yields, but it’s undermined the dollar.” Analysts say that holding yields down simply shifts the burden of fiscal concerns onto the currency. Bessent signaled on August 20 that he may increase buybacks further if needed.
The dollar’s weakness reflects broader market anxieties about U.S. fiscal health. The Treasury’s buyback operations, while substantial in appearance, remain small relative to net government debt issuance and the $40 trillion national debt load. Economists and strategists have questioned whether the move addresses the underlying structural issues driving yields higher, or merely masks them temporarily through government intervention in the bond market.
The euro, benefiting from the dollar’s decline, rose to $1.1711 on August 21, its highest level since May 14, while sterling reached $1.3675, its strongest level since February 11. Alternative assets like bitcoin surged, with the cryptocurrency climbing above $77,000 as investors sought hedges against dollar weakness and inflation concerns tied to the buyback program.
The next test for the dollar and Treasury yields may come at the Federal Reserve’s Jackson Hole Economic Symposium on August 30, when Fed Chairman Kevin Warsh is scheduled to speak. Markets are pricing in a 40% chance of a September rate hike, rising to 72% for December. Analysts at TD Securities noted that dollar risks remain skewed to the downside heading into Warsh’s remarks, with any failure to clarify the Fed’s inflation credibility likely to weigh more materially on the currency.
Sources
- Reuters — Dollar fell to three-month low against euro on August 21 due to Treasury buyback concerns; Marc Chandler quote on dollar weakness; Treasury Secretary Bessent’s comments on potential further buybacks.
- CNBC — Treasury Department announcement on August 19 doubling buyback operations to $4 billion; impact on 10-year and 30-year yields; details on buyback operation timing and scope.
- Trading Economics — Dollar index level at 99.0 on August 25, 2026; confirmation of three-month low status.
- Yahoo Finance — Dollar at three-month lows on August 21 as Treasury buyback concerns grew.
