Evercore’s Guha says Treasury action won’t change Fed’s September decision

The US Treasury just doubled down on its effort to keep the long end of the bond market from going haywire, and one of Wall Street’s most influential Fed watchers thinks it won’t matter much for the central bank’s next move.

Krishna Guha, vice chair and head of central bank strategy at Evercore ISI, said the Treasury Department’s decision to increase its planned purchases of outstanding 10- to 30-year debt “certainly complicates things” for Federal Reserve Chairman Kevin Warsh. But he added that it won’t change the Fed’s September interest rate decision.

What the Treasury actually did

On August 19, the Treasury announced it would raise the maximum size of its nominal long-end buyback operations from $2 billion to at least $4 billion per operation. That’s a clean doubling, effective September 9 through November 4.

The target: 10- to 30-year nominal coupon securities, the segment of the market where yields have been climbing to levels not seen since 2007.

The timing isn’t coincidental. Fiscal deficits continue to widen, pushing more supply into the market at the exact moment investors are demanding higher compensation for holding long-duration government debt. Elevated Treasury yields have created a feedback loop where higher borrowing costs amplify the deficit, which in turn pushes more issuance into the market. The buyback expansion is designed to interrupt that cycle, at least mechanically.

Why Guha thinks the Fed stays the course

Guha’s core argument is straightforward: the Treasury’s liquidity tool and the Fed’s interest rate framework operate on different tracks.

Kevin Warsh, who was sworn in as Fed Chair on May 22, has been navigating a tricky landscape since day one. Long-term yields have surged, inflation remains sticky enough to keep policymakers cautious, and the fiscal backdrop is anything but cooperative.

Warsh has emphasized a data-dependent approach to monetary policy, meaning the September decision will hinge on inflation readings, labor market data, and growth metrics. Not on whether the Treasury is buying back a few extra billion in seasoned bonds.

The broader yield picture

For portfolio managers, the expanded buyback program offers a modest cushion. More government demand in the 10- to 30-year sector could stabilize yields and reduce volatility in that part of the curve.

A $4 billion buyback operation is meaningful in day-to-day trading terms, but it’s a rounding error relative to the outstanding stock of long-dated government debt.

Warsh’s team will walk into the September meeting with the latest inflation data, the most recent jobs report, and whatever GDP revisions land between now and then. The Treasury’s buyback schedule will be a footnote in the briefing book, not a headline.

Guha’s framing suggests the September meeting is already largely locked in based on the macro data path, and no amount of Treasury market engineering will move the needle on the rate decision itself.