The U.S. Treasury periodically buys back unmatured marketable securities. Participation in buybacks is strictly voluntary. Buybacks don’t occur on a regular pattern. With buybacks:
- Treasury has more flexibility in managing the public debt.
- Treasury can continue offering regular new securities in different maturities, and in more volume, than we otherwise could. This results in improved liquidity for new securities, which could lower the government’s interest expense and promote more efficient capital markets.
- There is more control over the maturity structure of the outstanding debt. Without a buyback program, Treasury might need to further reduce the size and frequency of new issues.
- Treasury can absorb extra cash whenever revenues are greater than the immediate spending need, making them a good cash management tool.
- Treasury may be able to lower the government's interest expense by buying higher-yield debt and replacing it with lower-yield debt.
For all the rules on buybacks, see 31 CFR Part 375.