Scott Bessent has been trying to push long-term borrowing costs lower for months, deploying an expanding toolkit of buyback operations and debt-maturity management tactics. In a recent appearance on the Reuters Econ World podcast, Bessent outlined his thinking on US interest rates and the government’s approach to managing what has become a historically difficult bond market.
The Treasury twist, explained
Bessent’s flagship maneuver is what market watchers have dubbed a “Treasury twist.” The strategy involves issuing more short-term debt, things like Treasury bills that mature in weeks or months, while simultaneously buying back longer-dated bonds with maturities spanning 10 to 30 years. The goal is to reduce the supply of long-term bonds in the market, which should, in theory, push their prices up and their yields down.
In late August, Bessent announced plans to double the size of these regular buyback operations from $2 billion to at least $4 billion per operation, with the expanded program set to begin on September 9. The 30-year Treasury yield climbed to roughly 5.3%, its highest level in 19 years. The 10-year note reached approximately 4.73%. Bessent has argued that current yield levels don’t reflect market fundamentals, suggesting that fear and positioning are inflating borrowing costs beyond where they should be.
