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Fundstrat co-founder and analyst Tom Lee said that expectations that the U.S. Treasury Department may deploy approximately $1 trillion to expand its long-term bond repurchase program could be positive for financial markets.
According to Lee, a large-scale buyback of long-term government bonds by the U.S. Treasury Department could put downward pressure on long-term interest rates. He noted that such a development could support the valuations of assets sensitive to long-term interest rates, such as stocks, cryptocurrencies, gold, and real estate.
The renowned strategist stated that the decline in long-term interest rates would increase the attractiveness of “long-term assets,” which are particularly sensitive to the present value of future cash flows. Lee argued that bond buybacks should therefore be considered a marginal improvement in liquidity conditions in the markets.
It was previously reported that a senior U.S. Treasury official had said that approximately $1 trillion in the Treasury General Account (TGA) could be used to support the recently expanded bond repurchase program.
*This is not investment advice.