Overview
- Henry Paulson told Bloomberg in a Thursday interview that policymakers should have a short, targeted emergency plan ready for a sudden drop in demand for U.S. bonds.
- He warned that weak auctions could drive prices down and yields up, leaving the Federal Reserve to absorb supply as buyer of last resort.
- The Treasury conducted a $15 billion buyback of older notes maturing between 2026 and 2028 to boost liquidity in less traded securities.
- Paulson tied the risk to the fiscal path, with federal debt near $39 trillion and budget forecasters projecting a record debt-to-GDP ratio in the years ahead.
- Stress in Treasurys could hit crypto because large stablecoin issuers hold big reserves in T-bills and repo, linking digital assets to U.S. government debt liquidity.