Last week, Treasury Secretary Scott Bessent unveiled what he described as a “Treasury Twist,” a policy aimed at relieving pressure on long-term interest rates as 30-year Treasury yields approached their highest levels since 2007. The Treasury announced it would at least double the size of its buyback operations in the 10-to-20-year and 20-to-30-year sectors, purchasing up to $4 billion or more of longer-dated bonds while funding those purchases through increased short-term issuance. The stated objective was to improve liquidity in what Bessent characterized as a thinly traded long-end market where yields had risen beyond levels justified by economic fundamentals.
The 30-year Treasury yield fell initially after Bessent unveiled the enhanced buyback program on August 19, but the rally has been tentative since then. Indeed, yields have remained below their pre-announcement highs, suggesting the Treasury’s actions have at least slowed the upward momentum in long-term rates.
Compared to the closest modern precedents, Bessent’s program is relatively modest in scale. The Federal Reserve’s Operation Twist involved hundreds of billions of dollars of balance sheet adjustments, while the Bank of Japan’s Yield Curve Control regime paired outright bond purchases with an explicit yield target backed by the central bank’s unlimited balance sheet. In contrast, Treasury buybacks are being executed by the federal government, not the FOMC, and lack both the scale and price-setting mechanism that made prior interventions more effective. However, Bessent may not be done yet.
CNBC reported over the weekend that Treasury officials view the nearly $1 trillion Treasury General Account (TGA) as available to help fund the expanded buyback program, giving the Treasury considerably more firepower than markets initially assumed. However, the TGA also serves as the federal government’s primary cash account, funding day-to-day government expenditures. Any meaningful drawdown would therefore need to be replenished through future Treasury issuance, meaning the strategy may alter the timing and composition of supply but does little to address the underlying pressures created by persistent fiscal deficits and a growing stock of government debt.
Ultimately, the Treasury Twist cannot be viewed in isolation. Since taking office, Bessent has consistently demonstrated a willingness to intervene across markets, whether through efforts to stabilize the yen, support international dollar liquidity through swap line discussions, or now influence the long end of the Treasury curve through buybacks and the potential use of the TGA.
As the Fed has retreated from actively managing financial conditions and sought to return a greater role to market price discovery, the Treasury has increasingly emerged as a source of policy signaling and market influence. More broadly, markets have spent nearly two decades operating in an environment of government involvement following the Global Financial Crisis (GFC). If that era took years to build, it would likely take as long to unwind.
Zooming out, long-term rates are increasingly being driven by forces that lie beyond the Treasury Department’s direct control, namely a global competition for capital as governments finance large deficits and private borrowers fund the once-in-a-generation buildout of AI infrastructure. Yet Bessent appears determined to push back, using whatever tools are available to temper the impact on long-term yields. For bond investors, the challenge is balancing the structural pressure of higher term premiums against the growing likelihood of periodic policy interventions designed to suppress them.
