On August 6, the U.S. government will begin a massive $50 billion Treasury buyback program, coinciding with concerns about an emergency Fed rate cut.
On Tuesday, August 6, 2024, the United States will initiate its ambitious Treasury buyback program.
This initiative aims to acquire $50 billion in Treasury securities every month.
Moreover, it comes at a critical time, as the US Federal Reserve is poised to announce an emergency interest rate cut soon.
U.S. Treasury Buyback Plan
According to the latest tentative schedule, the program will commence with a $8.5 billion buyback in August.
In addition, a tremendous $31.5 billion in Treasury buybacks will follow in September.
Afterward, the United States government will commence a $10 billion buyback in October.
This action is intended to facilitate liquidity and regulate the supply of government bonds in the market.
Simultaneously, market speculation is rampant about the potential emergency rate cut by the U.S. Fed.
Wharton’s Professor Jeremy Siegel has been vocal about anticipating a significant rate cut.
According to an interview with CNBC, Siegel advocated for a 75 basis point emergency cut, followed by another 75 basis point cut in September.
“Absolutely, and this may surprise you, I’m calling for a 75 basis point emergency cut in the Fed funds rate with another 75 basis point cut indicated for next month at the September meeting, and that’s minimum,” Siegel stated.
Moreover, he elaborated that the current Fed funds rate should be between 3.5% and 4% in light of the most recent economic data.
Also, Siegel criticized the Federal Reserve for its inaction in the face of significant improvements in inflation and employment rates.
“We’ve gone down 90% towards the target on the inflation rate. We’ve overshot the target on the employment. Those are the two targets explicitly mentioned by the Federal Reserve,” he argued.
Robert Prechter, a well-known financial analyst and the president of Elliott Wave International, has also predicted an emergency rate cut.
Prechter believes that the Federal Reserve will intervene due to the recent market turbulence before its scheduled September meeting.
Probability For 50 Bps Cut Soars
“I think there’s gonna be a surprise rate cut before the September meeting because I think rates have started falling faster,” Prechter said, according to a FOX Business report.
Moreover, he noted that the last time the US Fed made such a move was during the height of COVID-19, in response to worries of global economic collapse.
This historical precedent lays the groundwork for a current rate cut.
However, not all economists share this optimistic outlook.
Several individuals argue that an emergency rate cut would confirm that the global and U.S. economy are in peril.
According to experts such as Peter Schiff and Scott Melker, it might lead to an even more severe market crash.
Despite this, the CME FedWatch Tool predicts a 74.5% probability of a 50 basis point rate cut in the September meeting.
Whilst, the probability for a 25 basis point cut stands at 25.5%.
These speculations have elicited a variety of market responses.
Polymarket, a betting service, predicted a 55% odds of an emergency rate cut yesterday, amid rumors of a potential emergency Fed meeting.
However, these odds have since dropped to 18% due to the lack of an official announcement.
The Treasury buyback program is believed to be an additional measure to the potential rate cuts.
Its objective is to stabilize the financial markets.
The government aims to support bond prices and maintain yields by reducing the supply of Treasuries.
This can indirectly contribute to the economy’s stability in the face of recession concerns.
Amid these developments, the crypto market has experienced a recovery, providing a sense of solace following Black Monday.
