--- title: "Treasury Buyback: 'Signal Value' Outweighs 'Actual Impact'! Nomura: If Markets Continue to Deteriorate, the Fed Will Step In with 'YCC or QE'" type: "News" locale: "en" url: "https://longbridge.com/en/news/296551851.md" description: "The U.S. Treasury hastily launched a debt buyback program. Nomura Securities strategist McElligott hit the nail on the head: this is merely a \"band-aid on a bullet hole\"—the true signal is that authorities have acknowledged long-end interest rates are out of control and have crossed a red line. With corporate debt issuance surging 59%, Iran tensions pushing up energy prices, and global fiscal expansion creating triple pressures, the triggers for Yield Curve Control (YCC) and Quantitative Easing (QE) are warming up. However, before the valves are opened, market conditions must first worsen" datetime: "2026-08-21T01:12:11.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296551851.md) - [en](https://longbridge.com/en/news/296551851.md) - [zh-HK](https://longbridge.com/zh-HK/news/296551851.md) generator: "portal-rs" --- # Treasury Buyback: 'Signal Value' Outweighs 'Actual Impact'! Nomura: If Markets Continue to Deteriorate, the Fed Will Step In with 'YCC or QE' The U.S. Treasury suddenly announced an aggressive buyback plan, sending a clear signal to the market—that letting long-end interest rates spiral out of control has become an "unacceptable" option. However, Nomura Securities strategists warned that this is merely the prologue; the real policy heavy artillery has yet to enter the stage. Charlie McElligott, Cross-Asset Strategist at Nomura Securities, stated bluntly in his latest report that this buyback announcement is essentially a "statement of intent." Through this move, Treasury Secretary Bessent signaled to the market that authorities have adopted a more proactive intervention stance. Gold and Bitcoin rose in response, while the U.S. dollar fell, as the market interpreted this as a substantive shift in policy posture. McElligott further judged that if the market experiences deeper deterioration, authorities may deploy policy tools such as Yield Curve Control (YCC) or direct Quantitative Easing (QE/LSAP). The triple pressures of interest rates, energy, and inflation continue to superimpose, leaving risk exposures in equity and credit markets highly vulnerable. ## Buyback Announcement: Signal Value Greater Than Substantive Operation McElligott’s characterization of this buyback was incisive—"a band-aid on a bullet hole." From a technical perspective, the Treasury buyback is a fiscal operation for debt management rather than a monetary policy tool. It essentially involves swapping newly issued bonds for old debt, remaining neutral in terms of cash flow and deficits. McElligott pointed out that the specific details of the buyback itself are "irrelevant and insignificant"; its value lies entirely in the signaling aspect: **authorities have crossed a certain red line, formally acknowledging that the rapid repricing of long-end interest rates has reached the boundary of policy tolerance.** Notably, the execution of this announcement was quite hasty—the wording was chaotic, and the title even omitted the word "buyback," drawing widespread mockery from market participants. Nevertheless, there was no disagreement in the market's interpretation of the underlying intent: this was a deliberate shift in posture, not a technical operational error. Initial market reactions confirmed this interpretation: long-end interest rates briefly declined, gold and Bitcoin strengthened simultaneously, and the U.S. dollar came under pressure. However, the subsequent deterioration in the Iran situation and energy markets quickly overshadowed the sentiment boost from the buyback. Interest rates returned to a bear steepening trend, and U.S. stocks failed to hold onto their overnight gains. ## Multiple Pressures Superimposed, Structural Pressure on Long-End Rates Intensifies McElligott detailed the multiple structural forces currently suppressing long-end interest rates, pointing out that these factors are reinforcing each other in a non-linear manner. **First is the "crowding-out effect."** The surge in corporate credit supply—year-to-date investment-grade bond issuance has reached $1.7667 trillion, a year-on-year increase of 59%—combined with the AI financing wave, is competing for the private sector's duration absorption capacity, keeping demand for U.S. Treasuries under continuous pressure. Meanwhile, Japan's current policy dilemma is reshaping existing market expectations regarding the supply and demand dynamics of U.S. Treasuries. **Second is the fat-tailing of inflation tail risks.** McElligott specifically highlighted the upside risk of "Crack Spreads"—renewed tensions in Iran and the Strait of Hormuz are threatening the global supply of refined products. He emphasized that the Strategic Petroleum Reserve (SPR) stores crude oil rather than refined products, meaning it cannot be directly released to curb prices for industrial goods such as diesel and aviation fuel. This implies that once supply is disrupted, price shocks will transmit directly to real economy sectors such as transportation, agriculture, and manufacturing. European natural gas prices have risen to €65 per megawatt-hour, the highest level since March 2026; German 5-year government bond yields also touched levels above 3% for the first time since 2008. **Third is the chronic rise in term premiums driven by global sovereign fiscal expansion,** which overlaps with the structural trend of countries promoting supply chain reshoring and competing for key resources under the guise of national security, further solidifying inflation stickiness. ## YCC and QE May Arrive in a "Worse" Scenario McElligott's logical chain is clear and grim: authorities are already "warming up" the liquidity pump, but the real valve has not yet been opened. **He pointed out that launching YCC or QE/LSAP requires meeting one prerequisite—the spiral interaction between current interest rates and inflation/energy shocks must cause sufficiently deep damage to the real economy, making it an "inevitable" choice both politically and economically.** At that point, the Federal Reserve will send a substantive easing signal to the market by creating new reserves, expanding its balance sheet, and actively absorbing duration, thereby significantly improving financial conditions and encouraging capital migration toward risk assets through the "portfolio rebalancing channel." Until then, interest rates will continue to rise in a vacuum lacking clear guidance from the Federal Reserve, and there is no "clean exit" for the energy situation—unless there is a military escalation or the Trump administration makes political concessions. Regarding the stock market, McElligott believes that once interest rate spasms stabilize, coupled with earnings catalysts from tech giants like Nvidia, the market may have the opportunity to emerge with a pattern of "rising spot prices and rising volatility." However, in the short term, the sensitivity of high-yield bonds and small-cap stocks to credit spreads still poses significant downside risks, and deleveraging pressures have not been fully released. McElligott's conclusion is concise and powerful: the pump has started warming up, but the market must first get worse. ### Related Stocks - [8604.JP](https://longbridge.com/en/quote/8604.JP.md) - [NMR.US](https://longbridge.com/en/quote/NMR.US.md) - [NVDA.US](https://longbridge.com/en/quote/NVDA.US.md) - [NVD.DE](https://longbridge.com/en/quote/NVD.DE.md) ## Related News & Research - [MJP Associates Inc. 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