Evercore’s Guha says Treasury action won’t change Fed’s September decision

The US Treasury just doubled down on its effort to keep the long end of the bond market from going haywire, and one of Wall Street’s most influential Fed watchers thinks it won’t matter much for the central bank’s next move. Krishna Guha, vice chair and head of central bank strategy at Evercore ISI, said the Treasury Department’s decision to increase its planned purchases of outstanding 10- to 30-year debt “certainly complicates things” for Federal Reserve Chairman Kevin Warsh. But he added that it won’t change the Fed’s September interest rate decision. What the Treasury actually did On August 19, the Treasury announced it would raise the maximum size of its nominal long-end buyback operations from $2 billion to at least $4 billion per operation. That’s a clean doubling, effective September 9 through November 4. The target: 10- to 30-year nominal coupon securities, the segment of the market where yields have been climbing to levels not seen since 2007. The timing isn’t coincidental. Fiscal deficits continue to widen, pushing more supply into the market at the exact moment investors are demanding higher compensation for holding long-duration government debt. Elevated Treasury yield...