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.
Why the market isn’t cooperating
US national debt has surpassed $40 trillion, and annual interest costs on that debt are approaching $1 trillion. The government is now spending nearly as much on interest payments as it does on defense.
Yields briefly dipped on Bessent’s buyback announcements before rebounding. Buying back existing debt doesn’t reduce the total amount owed — it shifts the maturity profile, trading long-term obligations for short-term ones that need to be refinanced more frequently. Some Federal Reserve officials, including Chairman Kevin Warsh, have advocated for a more market-oriented approach to interest rate determination, suggesting Treasury interventions designed to suppress yields could distort price signals that investors rely on to assess risk.
What this means for borrowers and markets
The 10-year Treasury yield is the gravitational center of American finance. When it rises, mortgage rates follow, as do auto loans, credit card rates, and corporate borrowing costs.
Bessent has emphasized that his toolkit is large and that the Treasury has options beyond buybacks. The US is running large structural deficits with no credible plan to reduce them, with deficits estimated to contribute around 6% of GDP. Doubling the size of buyback operations is a tactical move, and the bond market’s tepid response to announcements indicates ongoing concerns about fiscal sustainability remain unaddressed.