The US Treasury can buy back the bonds it sells before their maturity date. Why would it do this? Well, if they had sold a 30-year 5% bond, but now they sell 30-year 0.2% bonds, they can save on interest payments by selling a 0.2% bond and using the money to buy back the 5% bond. It is like refinancing your mortgage at a lower rate to reduce your payments.
The situation is now reversed and they are buying back 0.2% bonds. Since they up to their eyeballs in #
debt, the only way to fund doing that is to sell 5% bonds. That is like refinancing your mortgage at a rate 25 times your current mortgage rate. No sane person would do that. Why are they?
A hypothesis I've heard that makes sense is that it is a stealth bailout of the banks who hold this low-interest paper which has plunged in value in today's high interest rate environment. I think the Federal Reserve's program to loan money based on the face value of these assets has expired, so maybe this is the latest way to try to keep the system afloat.
