Also, we have a severe clash between fed policy and Treasury bond manipulations.
Increased Manipulation Announcement
Please note Treasury Announces Increased Sizes of Nominal Long-End Liquidity Support Buybacks Beginning September 9
The U.S. Department of the Treasury is increasing, by at least double, the size of liquidity support buyback operations for longer-dated nominal coupon securities (the 10-year to 20-year sector and the 20-year to 30-year sector). The current maximum size of $2 billion per operation will be at least $4 billion per operation.
This change is effective September 9, 2026 and will be in effect for the remainder of this refunding quarter (through November 4, 2026). Treasury will provide more information about future buyback sizes at the next Quarterly Refunding, scheduled for November 4, 2026.
The announcement was yesterday. Today, the bond market laughed.
Bear in mind, this is a trivial amount. It was the announcement that mattered, but only for a day,
Bessent = Yellen
Not the Fed, Not QE
Operation Twist
Bloomberg reports Bessent’s Treasury Twist Clouds Warsh’s Plea to ‘Play the Ball’
Treasury Secretary Scott Bessent’s intervention to bring down long-term borrowing costs is another complication for the Federal Reserve as it grapples with whether to raise interest rates.
New Fed Chairman Kevin Warsh has urged investors to take their lead from economic data and not rate projections from the central bank. That would give the Fed a clearer signal on how markets are reading the economy. But Fed watchers say the Treasury’s intervention could confuse the signal that markets send.
“Market participants are learning to play the ball, not the referee — and market prices will continue to respond in the direction and magnitude they see fit,” Warsh said in his July press conference after Fed officials held interest rates steady.
Bessent’s move to boost buybacks of longer-dated debt complicates that approach. Yields on 30-year Treasuries initially slumped on news of the buyback program.
“This certainly isn’t consistent with Warsh’s idea that markets need to play the ball,” said Stephanie Roth, chief economist at Wolfe Research. “In theory it clouds the signal we’re getting from markets, which supposedly the Fed is now taking even more signal from.”
Bessent pushed back on views that the intervention will impact whether or not the Fed decides to raise interest rates.
“That has nothing to do with the decision that I announced this week on the buybacks,” Bessent said in an interview on CNBC. “Part of it is signaling here, and to show that we believe that the yields don’t reflect the underlying fundamentals.”
“I do not think the Treasury intervention to jack up the size of bond buybacks complicates the Fed’s rate outlook,” said Nationwide Chief Economist Kathy Bostjancic. “But certainly it is ironic that Fed Chairman Warsh emphasized how much he values ‘unfiltered’ feedback from the markets.”
Ultimately, Bessent’s move will dilute Warsh’s guidance that markets can form their own views on the economy and monetary policy without any hints from the Fed, Krishna Guha, vice chairman of Evercore ISI, said in a note.
“It is hard to make that case when investors see Bessent as trying to manage the long end,” Guha wrote.
Let’s Twist Again
The Donald Trump Debt Clock
Let’s Discuss the Fundamentals
“We believe that the yields don’t reflect the underlying fundamentals,” said Bessent.
I totally agree, but in the opposite sense.
Please note US Debt Tops $40 Trillion, the Pace Is What’s Most Alarming
Debt topped $40 trillion today. But let’s discuss what really matters.
Bond Market Manipulation
Today, in an attempt to calm the bond market, the treasury secretary started manipulating rates with bond purchases.
Since nothing is fixed by this manipulation, it cannot work.
To understand why diesel is rising much faster than the price of gasoline, please see US Diesel Crack Surpasses $100 a Barrel for the First Time, Farmers Suffer
Record high crack spreads. Serious economic ramifications.
The short answer is there is a shortage of global refining capacity.
Bond manipulation sure will not fix that. Nor will bond manipulation fix out of control spending by Congress.
The Fed is not in a good spot and Fed policy is at odds with Treasury policy.
The next Fed meeting is going to be a real hoot.
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