MNI: Treasury Buybacks Will Not Be A Fed Substitute - Liang

The U.S. Treasury Department is continuing to design a securities buyback program aimed at improving liquidity but it won't be a substitute for Fed actions, Under Secretary for Domestic Finance Nellie Liang said Thursday.

"Given the caps on buyback amounts, our purchases would not be a substitute for actions that could be taken by the Federal Reserve during periods of acute market stress," she said in prepared remarks. The agency expects to provide an update on timing in the next quarterly refunding announcement on January 31, she said.

Treasury intends to initially purchase as much as USD30 billion per quarter in liquidity support operations and up to USD120 billion per year for cash management, Liang said, adding decisions will be sensitive to market prices and there are no fixed targets. "The amount we buy in any given operation might be materially lower than the maximum amount that we announce we’re willing to buy," she said.

"Our intention is to conduct buybacks in a regular and predictable manner, cycling through each of our maturity buckets at least once per quarter for liquidity support," she said at a Treasury market conference. "While cash management operations will be more episodic, their timing will nevertheless be predictable because they will be focused during periods of high cash inflows such as around major tax filing dates."

Treasury securities trading experienced severe strain early in the pandemic, causing officials to investigate the causes and discuss possible ways to improve the system. On Treasury market conditions in 2023, Liang said liquidity conditions have held up well and moves have been orderly.