US Treasury’s bond buyback push puts Bessent on a collision course with the Fed

The US Treasury has a new favorite tool, and the Federal Reserve is not exactly thrilled about it. On August 19, Treasury Secretary Scott Bessent announced a significant expansion of the government’s bond buyback program, doubling the per-operation cap on longer-dated securities from $2 billion to at least $4 billion. The operations are scheduled to run from September 9 through November 4, a timeline that lands squarely in the run-up to midterm elections. The backdrop is hard to ignore. The 30-year Treasury yield had climbed to roughly 5.3%, a level not seen in nearly two decades, before the announcement offered brief relief. Yields dipped to around 5.18% in the immediate aftermath, then promptly reversed course, almost erasing the move entirely. What Bessent is actually trying to do Think of a Treasury buyback like a government buying back its own old debt on the open market. When the Treasury purchases longer-dated bonds, it injects cash into the system and, in theory, pushes long-term yields lower by reducing the supply of bonds investors are holding. Bessent’s gambit has drawn comparisons to “Operation Twist,” the strategy the Federal Reserve used in the early 1960s and again i...