Today’s Market Outlook
Focus on Treasury Secretary Bessent’s Potential Use of the TGA and Its Impact on Treasuries, the Dollar, and Risk Assets
■ Market Summary
At the start of the week, markets are focused on U.S. Treasury Secretary Bessent’s expected Iran sanctions, fiscal-consolidation measures, and the potential funding source for long-term Treasury buybacks.
USD/JPY is trading in the upper 158 range, EUR/USD in the upper 1.16 range, and GBP/USD in the low-to-mid 1.36 range.
The dollar is broadly firm in London trading, with particular strength against the Canadian dollar. Concerns over retaliatory tariffs between the United States and Canada are weighing on the Canadian currency.
Today’s central topic is reports that the U.S. Treasury could use the Treasury General Account, or TGA, with a balance of around $950 billion, to fund long-term bond buybacks.
■ What Is the TGA?
The TGA, or Treasury General Account, is the U.S. government’s deposit account at the Federal Reserve. It can be viewed as the government’s operating cash account.
According to reports, Treasury Secretary Bessent has built the TGA balance to around $950 billion.
This is significantly above the $550–600 billion range that was seen as a benchmark under the previous administration.
The Treasury may use part of these funds to buy back long-term Treasury bonds.
However, at this stage, none of the following has been formally confirmed:
・Whether the TGA will actually be used
・How much of the balance could be used
・When any operation would take place
For now, markets are treating it as a possible policy option rather than a formally announced measure.
■ Impact on Long-Term Treasury Buybacks
Last week, the U.S. Treasury announced that it would increase the maximum size of buybacks in the 10- to 30-year Treasury sector from $2 billion to at least $4 billion per operation.
Initially, markets expected a form of “Treasury Twist,” in which the Treasury would issue more short-term debt and use the proceeds to buy back longer-dated bonds.
However, if the TGA can be used as a funding source, the Treasury could potentially have greater scope to influence the long-term bond market.
If the TGA is drawn down to fund buybacks, markets may expect the following sequence:
TGA balance declines
↓
Funds flow back into the private banking system
↓
Long-term Treasury supply-demand conditions improve
↓
Downward pressure on long-term yields
The U.S. 10-year Treasury yield has recently fallen toward 4.70%. Expectations of TGA usage could provide additional support for lower yields.
■ Impact on the Dollar
In the short term, expectations that TGA usage could lower long-term yields are likely to weigh on the dollar.
Lower U.S. yields
↓
Reduced yield appeal of the dollar
↓
Capital flows into the euro, pound, Australian dollar, and New Zealand dollar
↓
Dollar weakness
This is the basic scenario.
A drawdown in the TGA may also be viewed as an effective improvement in market liquidity.
As a result, capital may flow into:
・Equities
・Gold
・Bitcoin
・Other risk assets
Last week’s Bitcoin rally may also have reflected expectations for lower yields, dollar weakness, and improved liquidity from the larger Treasury buyback program, alongside optimism surrounding the Clarity Act and short covering.
■ Key Risks
However, using the TGA is not permanent monetary easing.
If the government later seeks to rebuild the balance toward $950 billion, it would need to issue additional Treasury debt.
That could lead to:
Increased Treasury issuance
↓
Greater Treasury supply
↓
Upward pressure on long-term yields
↓
Dollar buying, or dollar selling driven by fiscal concerns
There is also a longer-term risk that markets interpret this as stronger intervention by the Treasury in the government-bond market, potentially undermining confidence in U.S. fiscal management.
In that case, rising U.S. long-term yields might not produce dollar strength. Instead, the market could see a broader “sell America” move, with funds flowing into gold, Bitcoin, and other currencies.
■ Iran Sanctions and Oil
Treasury Secretary Bessent is also expected to announce large-scale sanctions intended to economically isolate Iran and its trading partners.
If tighter sanctions increase concern over oil supply or maritime logistics, oil prices could rise.
Higher oil prices
↓
Renewed inflation concerns
↓
Upward pressure on U.S. long-term yields
↓
Support for the dollar
The market therefore faces two opposing forces:
・Downward pressure on yields from potential TGA use and Treasury buybacks
・Upward pressure on yields from Iran sanctions and higher oil prices
The dollar is likely to remain highly sensitive to the reaction in the Treasury market.
■ USD/JPY
USD/JPY is trading in the upper 158 range.
If expectations for TGA usage strengthen and U.S. long-term yields fall, USD/JPY could test levels below 158.00.
Conversely, if sanctions on Iran lead to higher oil prices, increased inflation concerns, and a rebound in U.S. yields, USD/JPY could recover into the 159 range.
However, intervention concerns are likely to intensify in the upper 159 range and near 160.00.
Even if USD/JPY rises, sustained one-way upside is likely to remain difficult.
■ Canadian Dollar
The Canadian dollar is the weakest major currency today.
The main reason is concern over retaliatory tariffs between the United States and Canada.
Higher oil prices could support the Canadian dollar, but if tariff-related concerns over economic deterioration intensify, oil alone may not be enough to trigger sustained CAD buying.
USD/CAD is likely to be driven by the balance between tariff headlines and oil prices.
■ Key Points Today
① Whether there is any formal announcement on TGA usage
② The scale and funding source of long-term Treasury buybacks
③ Whether the U.S. 10-year yield continues falling around 4.70%
④ Specific details of the Iran sanctions
⑤ Whether oil prices rise
⑥ Whether USD/JPY breaks below 158.00 or recovers into the 159 range
⑦ Whether capital continues flowing into gold, Bitcoin, and other alternative assets
⑧ Further developments in U.S.-Canada retaliatory tariffs
■ Summary
Expectations that the TGA could be used for long-term Treasury buybacks may have a greater market impact than last week’s increase in buyback size.
In the short term, the measure is likely to be viewed as supportive for lower long-term yields, a weaker dollar, and inflows into equities, gold, and Bitcoin.
However, TGA usage has not been formally decided. If the TGA later needs to be rebuilt through new Treasury issuance, it could reignite higher yields and concern over U.S. fiscal conditions.
Markets will closely watch Secretary Bessent’s comments and assess whether changes in U.S. yields lead to dollar strength—or instead trigger a broader sell-off in U.S. assets and reduced demand for the dollar.
