JPMorgan Chase: U.S. Treasury bond repurchases carry credibility risks.

JPMorgan strategists warn that the market may view the U.S. Treasury’s unexpected move to push down long-term financing costs as lacking credibility, a development that could drive up term premiums and bond yields over time. The Treasury announced Wednesday it will at least double its bond repurchase scale to provide "greater liquidity support" — an action aimed at lowering long-term U.S. Treasury yields. But JPMorgan argues the measure is only a temporary fix, not a long-term solution: the U.S. economy is near full employment yet still running a 6% fiscal deficit. Strategists including Jay Barry wrote, "Without genuine fiscal consolidation, we worry the market will see this move as lacking credibility. If the Treasury becomes more opportunistic in debt management and further deviates from its 'regular and predictable' principles, this could lead to higher long-term premiums and yields." The total size of U.S. Treasuries has topped $40 trillion, making it harder for policymakers to control financing costs even as the U.S. government keeps issuing more government debt. A market survey shows roughly 60% of respondents believe the U.S. debt situation will continue deteriorating until it sparks a major crisis. (Source: Jinshi)