Why Bessent's bond market maneuver is unlikely to work
Treasury Secretary Scott Bessent's decision to increase Treasury buybacks to at least $4 billion is unlikely to succeed, according to the article. Historical attempts at similar 'Operation Twist' strategies have failed when not accompanied by monetary policy changes. The piece argues that bond markets will eventually adjust to reflect underlying fiscal and inflation realities.
Bessent’s plan mirrors the 1961 and 2011 U.S. attempts, both of which relied on shifting the maturity mix of government debt. In 1961, expansionary money growth fueled inflation, overwhelming the yield-curve manipulation. In 2011, the Fed paired its twist with aggressive monetary easing, which provided the real stimulus. Japan’s later yield-curve control, despite massive bond purchases, failed to lift money growth above 3% for most of its run, underscoring that fiscal-only interventions lack traction.
The article stresses that yields respond to credit supply-demand and inflation, the latter driven by monetary policy. Without a credible deficit-reduction plan or central bank cooperation, longer-term holders will simply reprice bonds to reflect fiscal and inflation risks. Bessent’s move may flatten the curve briefly, but history suggests it cannot override underlying economic fundamentals.
This maneuver could affect investors, retirees, and borrowers if it fails to hold down long-term rates. Pension funds and insurers may face higher yields, while mortgage and corporate borrowers could see costs rise. The episode may also shape public trust in Treasury management, as repeated failed interventions could signal fiscal weakness. However, its impact may remain contained if markets view it as a temporary political gesture rather than a structural policy shift.