Treasury's latest $6 billion buyback shows why Wall Street dealers want the government to rethink how it buys bonds, not just how much it buys.

The US Treasury bought back $6 billion of older government bonds on Nov. 4, hitting the full limit of its latest operation. On paper, that looks like a success for a program designed to make the Treasury market easier to trade.

But there's a catch. One bond accounted for $4.9 billion, or 82% of everything Treasury agreed to buy. Add another $950 million from a second bond, and just two securities made up almost 98% of the entire purchase. Of the 40 bonds eligible for the operation, only seven were bought.

This is the kind of concentration Wall Street dealers have been worried about for months. In feedback published by Treasury on Nov. 4, dealers said the larger buybacks were helping market liquidity.

However, they also explained why simply increasing the program size might not be enough to achieve that.

Their feedback came before Wednesday's operation, so they weren't responding to this particular result. We now know the Treasury can buy billions of dollars of bonds and still leave dealers holding the securities they hoped to sell. The amount purchased is important, but so is how those purchases are spread around.

The Treasury market is enormous, but not every government bond trades equally easily. The newest issues attract the most attention and typically have the deepest markets. Older bonds, known as off-the-run Treasuries , can be harder to sell quickly without accepting a lower price.

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