Buybacks have to be funded with new issuance. All Bessent can do is delay it. That’ll increase the risks of the coming Debt Ceiling.

By Wolf Richter for WOLF STREET.

So that didn’t take long. Bessent’s Hocus-Pocus 3 came this morning, put into the world by CNBC, citing as sources two unnamed “senior Treasury officials,” with this headline today: “Bessent could tap near $1 trillion Treasury General Account to fund bond buybacks, sources said.”

And the news spread from there with various headlines. But let me ask you this: Where else is the money for the buybacks supposed to come from?

The Treasury General Account (TGA) is the only checking account that the US government has. Every single dollar that the government spends on anything comes out of the TGA, and so the government “taps” the TGA to send you your tax refund, pay for military salaries and hardware, pay off maturing bonds, etc. And every single dollar that the government takes in from taxes and Treasury auctions goes into the TGA. Treasury must “tap” the TGA for every dollar it spends. Where else is the money for the buybacks supposed to come out of? A cookie jar?

The implication is that Treasury doesn’t have to sell T-bills (Treasuries maturing in 1-12 months) to fund these buybacks, but that it can just draw down the balance in the checking account.

Huge amounts of funds run through it every day. For example, the week Treasury sold $742 billion in securities at auctions generated $742 billion in inflows as those transactions settled. And as hundreds of billions of securities mature every week and have to be paid off, it generates huge outflows, which is why the balance has to be large enough to provide enough of a buffer to handle these massive and seasonal flows.

In its Quarterly Refunding Statement on August 5, Treasury said this about the TGA balance:

“Treasury is assuming a $950 billion cash balance at the end of September.  However, based on current projections for the upcoming refunding quarter, Treasury estimates that the size of the Treasury General Account (TGA) could peak at $1.05 trillion (plus or minus $50 billion) in late October.  This figure is consistent with Treasury’s long-standing cash balance policy and is driven by the large outflows expected to occur at that time.”

Sure, the government can draw down the TGA, as it does periodically, but eventually it has to refill the TGA through rapidly increased debt issuance.

And the debt ceiling is coming. The government will hit the debt ceiling of $41.1 trillion late this year or early next year, and unless Congress immediately raises it, the government will have to draw down the TGA to fund the deficits that come at it at a pace of $1 trillion every 3-5 months. And if Congress fails to raise the debt ceiling for long enough, Treasury will then draw down the TGA all the way to the last moment before it runs out of money.

There are currently $936 billion in the TGA. Note the periods of the debt ceiling when the TGA gets drawn down to precarious levels – and occasionally, such as in 2023 and 2021, to nerve-wracking levels, with the government essentially out of money before the debt ceiling gets resolved, followed by massive issuance of Treasury securities to refill the TGA.

And if it draws down the TGA in September and October to fund the Treasury buybacks, just before hitting the debt ceiling, it will have less cash left to bridge the debt ceiling debate, and less time left before it runs out of cash during the debt ceiling. And then when it’s resolved, Treasury has to issue $2 trillion in new debt in all haste within a few months to refill the TGA and fund the deficits.

We just went through this in 2025. In the six months after the debt ceiling was resolved at the beginning of July 2025, Treasury added $1.8 trillion to the publicly traded Treasury securities. Have these people at CNBC already forgotten?

There is simply no escape: Buybacks have to be funded with new issuance. All Bessent can do is shift the timing around a little, but that would increase the debt ceiling risks.

CNBC, always eager to carry manipulative stuff from sources, is just regurgitating Bessent’s effort to push down long-term Treasury yields by hook or crook. We have started to call them Bessent’s Hocus-Pocus shows, and we are now numbering them to keep track of them. This is #3.

The prior two Hocus-Pocus shows so far in August:

• Hocus-Pocus 1: joint US-Japan yen intervention, confirmed on August 3.
• Hocus-Pocus 2: announcement of doubling of the Treasury buybacks on August 19.

None of these hocus-pocus shows address the actual issues that the bond market faces: A flood of new debt coming at it at a pace of $1 trillion every 3-5 months that it must absorb come hell or high water; inflation; and rising uncertainty. Bessent’s hocus-pocus shows, instead of addressing the issues, just contribute to that uncertainty.

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