Treasury Buybacks FAQs
- What is a U.S. Treasury buyback operation?
- Why is the U.S. Treasury conducting a small-value buyback operation?
- Who will conduct the small-value buyback operation?
- Who can submit in the small-value buyback operation?
- Which securities will be considered for the small-value buyback operation?
- How will the small-value buyback operations be conducted?
- How will the U.S. Treasury communicate the small-value buyback operation results?
- When and how does security settlement take place?
- What happens to a security once it is purchased in a small-value buyback operation by Treasury?
- What authority does the U.S. Treasury have to purchase its securities?
- Where are buybacks reflected on Treasury reports/statements?
A buyback occurs when the U.S. Department of the Treasury (U.S. Treasury) redeems outstanding marketable Treasury securities. In a buyback, the owner of the security sells it to the U.S. Treasury on a voluntary basis at a price determined by a competitive auction process.
The U.S. Treasury recognizes that it is prudent to ensure operational readiness of all necessary buyback infrastructures. Treasury expects to conduct regular small-value buyback operations periodically to ensure operational readiness. These small-value buyback operations are not a precursor or signal of any pending policy changes regarding the U.S. Treasury's use of buybacks more broadly.
Buybacks of Treasury securities are conducted at the direction and full discretion of the U.S. Treasury. The U.S. Treasury has directed the Federal Reserve Bank of New York (FRBNY), as fiscal agent of the United States, to perform various activities necessary to conduct the small-value buyback operation.
Only primary dealers, as designated by FRBNY, may submit offers.
Ahead of each small-value operation, the U.S. Treasury will announce the specific security, or list of eligible securities, to be bought back. The announcement will be available on the TreasuryDirect website at http://www.treasurydirect.gov/instit/annceresult/buybacks/buybacks_annce.htm.
The small-value buyback operation will be conducted through a multiple-price competitive auction using FRBNY’s FedTrade system. Primary dealers will submit a fixed number of offers, which will be evaluated based on their proximity to prevailing market prices at the close of the buyback operation, as well as on measures of relative value as appropriate.
Treasury will publish summary results shortly after the operation closes. Summary results will include such information as: the total par amount offered and accepted, the number of securities eligible and accepted, and the par amount of offers accepted for each eligible security. Participating primary dealers will be notified of their accepted offers via FedTrade.
Treasury will publish detailed results by close of business on operation day. Detailed results will include such information as: the amounts offered and accepted, the highest price accepted, and the remaining privately held amounts outstanding for each eligible issue.
Summary and detailed results will be available on the TreasuryDirect website at http://www.treasurydirect.gov/instit/annceresult/buybacks/buybacks_results.htm.
Security settlement for the small-value buyback operation will typically occur one business day after the day of the operation (i.e., on a T+1 basis).
The par amount of a security that is bought back by Treasury will be redeemed once the transaction has settled.
Section 3111 of Title 31 of the United States Code authorizes the U.S. Treasury to "buy, redeem, or refund, at or before maturity, outstanding" U.S. Treasury securities.
The par amount of outstanding marketable Treasury securities redeemed via buyback operations is reflected as a redemption on various statements such as on Table III-A, "Public Debt Transactions" of the Daily Treasury Statement (DTS) and on Table III, "Detail of Treasury Securities Outstanding" of the Monthly Statement of the Public Debt (MSPD).