JPMorgan Warns Treasury Buybacks Are 'Credit Card' Tactic
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- U.S. Treasury, led by Secretary Scott Bessent, will at least double the size of its government debt buybacks from Sept. 9 through Nov. 4, shifting buying into longer-duration bonds while issuing shorter-dated bills.
- JPMorgan's James Sullivan, co-head of global fundamental research, told CNBC's "Squawk Box" that the buyback approach "can work for a while" but leaves the underlying debt burden intact — "eventually the mismatch starts to become more obvious."
- China's holdings of Treasurys have fallen to an 18-year low, while U.S. Treasury custody holdings for foreign governments sit at their lowest in 14 years, shrinking the pool of traditional buyers at a time of surging supply.
- Total government debt cited by Sullivan includes roughly $40 trillion in U.S. obligations and approximately $76 trillion across developed-market governments, with corporate bond issuance also at records — "the only way you balance supply and demand is through price."
- Leading AI companies have issued $200 billion of debt so far this year, up 80% from a year earlier, as spending on data centers and AI infrastructure intensifies competition for capital alongside government borrowing.
- Bond yields are now higher than the earnings yield on the S&P 500 according to JPMorgan data, making equities-versus-fixed-income allocation "significantly more complex" when stock valuations are already elevated.
Why it matters: The buyback expansion provides breathing room through Nov. 4 but doesn't shrink the $40 trillion U.S. debt load — and with foreign Treasury custody at a 14-year low and China at an 18-year low, the Treasury may need to clear higher yields to absorb supply, lifting borrowing costs for the corporations issuing a record $200 billion in AI-related debt this year.
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