Bessent’s ‘Treasury Twist’ Lasts Just One Day... Long-Term Rates Set by the Market

Buyback Expansion Effects Vanish in a Day
"QE Needed for Sustained Declines"

Scott Bessent, U.S. Secretary of the Treasury, launched the so-called "Treasury twist," combining the expansion of long-term Treasury bond buybacks with an increase in short-term issuances. However, the effect of lowering long-term interest rates lasted less than a day.

There are growing concerns that it is difficult for the Treasury's intervention alone to bring down long-term rates, given the structural factors driving rates higher: the United States' record-breaking national debt, increased demand for capital due to expanded artificial intelligence (AI) investments, and persistent inflation fears.

Scott Bessent, U.S. Secretary of the Treasury. 2026.05.13. Photo by Dongju Yoon

On August 23 (local time), Bloomberg News reported that Secretary Bessent has been actively intervening in the bond market to try to push down long-term Treasury yields. However, it pointed out that the fundamental factors moving the market are beyond his control.

On August 20, Secretary Bessent referred to the expanded buybacks of long-term Treasuries as "what I call the 'Treasury twist.'" This means the Treasury will purchase long-term bonds while simultaneously issuing more short-term Treasuries, aiming to alter the shape of the Treasury yield curve.

This terminology draws parallels to the "Operation Twist" implemented by the Federal Reserve in the 1960s, when the Fed bought long-term Treasuries and sold short-term ones to lower long-term interest rates. Bessent claims that current long-term Treasury yields are above what he views as the economic "equilibrium."

The Treasury's intervention had an immediate effect. Following the announcement of increased long-term buybacks on August 19, long-term yields plummeted. However, this effect disappeared in just one day. Subsequently, yields rebounded, and the 10-year U.S. Treasury yield—closely watched by Secretary Bessent—ended the week at 4.73%, near its highest level since he took office.

Matt King, founder at Satori Insight, pointed out that "every pathway to sustainably lower long-term yields ultimately requires choices the administration does not wish to make." He explained that a meaningful drop in long-term rates would require either a reduction in the federal deficit, a decline in the stock market, or a slowdown in AI investment.

Structural factors pushing up long-term yields remain in place. With U.S. national debt exceeding $40 trillion and major tech firms aggressively issuing corporate bonds to fund expanded AI investments, competition for funds between government and private companies is intensifying. Additionally, heightened inflation concerns following the Iran war are also putting a floor under long-term rates.

"Buybacks Serve Only as a Signal... QE Is Needed for Sustained Rate Declines"

Experts note that while expanded Treasury buybacks can temporarily lower long-term rates, the scale is insufficient to fundamentally alter the structural bond supply-demand dynamics.

Rebecca Patterson, a senior fellow at the Council on Foreign Relations and former JP Morgan and Bridgewater Associates executive, said, "Buybacks serve more as a signal than as a tool with real effects," evaluating that even further buyback expansions would not fundamentally change market dynamics. She pointed out that for a more sustained drop in long-term rates, quantitative easing (QE) by the Fed would be a more effective policy instrument.

The problem is that both Secretary Bessent and Chair Waller are critical of QE. Before taking office, Secretary Bessent compared ongoing QE to a "perpetual dosing regimen," and Chair Waller has also been a strong critic of QE since his tenure as a Fed governor.

As a result, if Secretary Bessent and Chair Waller maintain their current stance, policy options for lowering long-term rates become very limited.

Priya Misra, portfolio manager at J.P. Morgan Asset Management, remarked, "The U.S. economy remains resilient, and there is global competition for capital," adding, "It is only logical that interest rates are on the rise."

This content was produced with the assistance of AI translation services.