That Was Quick: Bessent Issues Hocus-Pocus 3 via CNBC: May “Tap” Treasury General Account to Fund Treasury Buybacks

The U.S. Treasury is considering using funds from the Treasury General Account (TGA) to finance bond buybacks, according to a report by CNBC that cited two unnamed senior Treasury officials. This development has raised questions about the potential impact on the impending debt ceiling crisis.

The TGA serves as the federal government's primary checking account, from which all expenditures, including military salaries, tax refunds, and bond maturities, are funded. All government revenue, including tax receipts and proceeds from Treasury auctions, is deposited into the TGA. Therefore, the account must be accessed to cover every dollar spent by the government.

The report suggests that the Treasury might avoid selling short-term Treasury bills to finance buybacks by instead drawing down the balance in the TGA. However, this would only delay the need for new debt issuance, not eliminate it. The Treasury must eventually replenish the TGA through increased borrowing.

According to the Treasury's Quarterly Refunding Statement released on August 5, the TGA balance is projected to reach $1.05 trillion (plus or minus $50 billion) by late October, up from an assumed $950 billion at the end of September. This projection aligns with the Treasury's long-standing cash balance policy and reflects anticipated substantial outflows.

While the government can temporarily draw down the TGA, as it has done in the past, this approach ultimately requires rapid and significant increases in debt issuance to refill the account.

The debt ceiling, currently set at $41.1 trillion, is expected to be reached late this year or early next year. If Congress does not raise the ceiling promptly, the Treasury will be forced to deplete the TGA to cover deficits, potentially drawing it down to minimal levels before the ceiling is resolved. Once the ceiling is raised, the Treasury would need to issue approximately $2 trillion in new debt within a few months to replenish the TGA and fund ongoing deficits.

This scenario played out in 2025, when the Treasury added $1.8 trillion to publicly traded Treasury securities within six months following the resolution of the debt ceiling in early July.

Analysts note that bond buybacks must ultimately be funded through new issuance. While Treasury Secretary Bessent's approach may only shift the timing of debt issuance, it could heighten risks associated with the debt ceiling.

CNBC's report, the third in a series labeled "Bessent’s Hocus-Pocus," has been criticized for promoting strategies that avoid addressing the root issues facing the bond market, such as a surge in new debt issuance, inflation, and growing uncertainty.

The bond market continues to face challenges, including the need to absorb approximately $1 trillion in new debt every three to five months, rising inflation, and increasing uncertainty. Critics argue that Bessent’s strategies, rather than resolving these issues, may exacerbate market instability.