U.S. Treasury Secretary Scott Bessent's plan to suppress long-term borrowing costs through larger-scale Treasury buybacks is facing an unforgiving test from the market. The Treasury Department announced Wednesday it would raise the per-operation cap on long-term Treasury buybacks from the existing $4 billion to $6 billion — a threefold increase — yet long-end yields rose rather than fell, with the 10-year touching a three-year high intraday and the 30-year breaking decisively above the 5.30% threshold.
Since taking office, Bessent has made lowering long-end yields one of his core policy objectives, but elevated oil prices, rising inflation expectations, a ballooning fiscal deficit, and the market's repricing of the Federal Reserve's policy path are forming a combined force far beyond what any single Treasury operation can counter.
The scale of this buyback expansion clearly fell short of Wall Street's expectations. Bessent had previously hinted publicly that per-operation buyback size could exceed $4 billion, and the market had at one point wagered that the operating room could reach $10 billion. The final $6 billion cap left many traders disappointed.
Deutsche Bank strategist Steven Zeng said bluntly that the $6 billion announcement failed to deliver the "shock and awe" investors had been hoping for. "It's like the Treasury created a monster and now has to keep feeding it," he said. Elias Haddad of Brown Brothers Harriman & Co. was even more pointed: "For now, the Treasury is bringing a pea shooter to a tank fight."
The market's clamor for larger buybacks reflects just how stubborn long-end rates have become. Later on Wednesday, the Treasury auctioned $39 billion of 10-year notes at a yield of 4.834%, the highest yield on record for that tenor's auctions.
Bessent himself acknowledged at an event in Texas on Tuesday that he cannot change the "equilibrium" price of Treasuries, and that his goal is merely to slow the pace of price volatility and prevent harmful narratives from taking hold and spreading. He attributed the rapid climb in long-end rates to market fears that "America cannot pay its debts," calling such concerns "absurd, but at one point they became the dominant narrative."
In characterizing the expanded buybacks, Bessent used the term "Treasury Twist," drawing on the Federal Reserve's historical precedent of using Operation Twist to depress long-term borrowing costs. He also said the buyback operations help banks offload less liquid securities, freeing up space for them to participate in new debt auctions.
Evercore ISI's head of economics, Krishna Guha, and his team wrote in a client note that Wednesday's announcement "shows Bessent is accepting the limited role of buyback operations," and that he "has likely come to realize that the U.S. cannot indefinitely prevent fundamentals from driving yields."
Wells Fargo macro strategists Angelo Manolatos and Francis Brown wrote in a research note that "other catalysts will be needed to push long-end yields lower," listing several possible conditions: slowing growth and inflation, lower energy prices, reduced Federal Reserve policy uncertainty, fiscal consolidation, or a contraction in corporate bond issuance.
On near-term policy signaling, the Treasury said Wednesday that the remaining six long-term nominal Treasury buyback operations this fiscal quarter will each have a maximum size of no less than $4 billion — wording consistent with the initial surprise announcement on August 19, offering no clear signal of further expansion.
It is worth noting that $6 billion is a cap, not a guaranteed purchase amount. According to statistics, since the buyback program was restarted in 2024, the Treasury has failed to complete full-size operations in only two of 52 long-term nominal Treasury buybacks, generally preferring to buy up to the cap. Deutsche Bank's Zeng also pointed out that the Treasury's "final buyback announcement" released at 11 a.m. that day can supersede the "preliminary announcement," meaning the actual final purchase amount could potentially exceed the cap.
The surprise expansion announcement on August 19 was released outside the Treasury's regular quarterly announcement window, catching investors off guard and sparking discussion about a shift in U.S. debt management style toward a "more interventionist" approach — a stark contrast to the Treasury's long-standing principle of being "regular and predictable."
Multiple investors and analysts interpreted the increased buybacks as an externalization of the Trump administration's anxiety over rising long-term borrowing costs ahead of the November congressional elections. As Treasury yields have continued to climb, U.S. mortgage rates have risen to their highest levels in more than a year, directly impacting ordinary consumers.
Bessent said in a Newsmax interview on September 1: "I'm making sure there are no major, severe adverse consequences." But judging from the bond market's current performance, this battle with the market is far from over.
The Gap Between Buyback Size and Market Scale
The current Treasury buyback program was launched by former Treasury Secretary Janet Yellen in 2024. Newly issued bonds typically have good liquidity, but as time passes, buying interest in older issues gradually shrinks. The market has long called on the Treasury to expand buyback sizes to free up institutional balance sheet capacity, enabling them to trade more liquid new issues and thereby exerting downward pressure on rates.
In 2024, the program ran for only seven months, with buybacks totaling $32 billion; in 2025, buyback volume rose to approximately $78 billion. Yet compared to the overall size of the market, these figures appear to be a drop in the bucket.
As of Monday, the total size of the U.S. Treasury market exceeded $32 trillion, with outstanding 20- and 30-year bonds at approximately $5.5 trillion. The $6 billion increase in buyback capacity this time amounts to roughly one-thousandth of outstanding long-dated bonds.
Note: Data sourced from U.S. Treasury Department announcements and market statistics.
The Debt Quandary and Bessent's Growth Narrative
Beyond buyback operations, Bessent has offered a different narrative framework for America's debt outlook. He said on Tuesday that if the U.S. can achieve 3% annual economic growth, it can grow its way out of its debt problem.
"We don't have a revenue problem; we have a spending problem," Bessent said. He argued that if the U.S. controls spending while maintaining 3% economic growth, "we can grow our way out of the debt situation."
Currently, total U.S. federal debt has surpassed $40 trillion; the annual fiscal deficit is projected to exceed $2 trillion when the current fiscal year ends on September 30.
Bessent is not overly concerned. "The Iran conflict will eventually subside, the fundamentals of the U.S. economy are very strong, and I think the economy will accelerate again," he said. He cited examples of how incentives from last year's major tax reform are driving a wave of new manufacturing plant projects: PepsiCo is expanding its Frito-Lay plant in Arizona, Winnebago has acquired a battery factory, and Boeing has increased Dreamliner production capacity.
On the spending side, Bessent said he is working with Office of Management and Budget Director Russ Vought on a fiscal consolidation plan to reduce the deficit. He also noted that had the U.S. Supreme Court not struck down President Trump's "Liberation Day" tariff policy, the U.S. could have collected $180 billion to reduce the fiscal deficit.
On the relationship between interest rates and energy prices, Bessent believes the current correlation between the two is at a historic high, but that this linkage will eventually break down. He said that as the U.S. establishes energy cooperation with Venezuela and the Middle East situation stabilizes, the oil market will see a supply glut within one to two years.
Oil Price Shock and Policy Dilemma
The energy price decline Bessent is counting on looks unlikely in the near term. Affected by Middle East tensions, international benchmark Brent crude futures broke above $100 on Wednesday, intensifying market concerns about central bank tightening and pushing sovereign bond yields higher across major Western economies.
High oil prices pressure long-end rates through two channels: on one hand, they directly push up inflation expectations, reducing the Federal Reserve's room to cut rates; on the other, they exacerbate fiscal deficit pressures, as rising energy import costs feed through to broader price levels.
Bessent has tried to package the buyback operations as a policy tool to counter rising yields, but the market's reaction suggests that in the face of macroeconomic fundamentals, a $6 billion buyback is more of a symbolic gesture than a decisive force capable of changing the direction of rates.
Of the conditions listed by Wells Fargo strategists for pushing yields lower, none is something the Treasury can control on its own. Slowing growth and inflation take time, energy prices depend on geopolitical developments, the Federal Reserve's policy path is determined by its independence, and fiscal consolidation requires congressional cooperation.
This means Bessent's escalation of buyback operations is more about signaling to the market that "the government is acting" than a genuine policy tool for reversing the yield trend. As the Evercore ISI team put it, Bessent "has likely come to realize that the U.S. cannot indefinitely prevent fundamentals from driving yields."
For investors, the 10-year Treasury yield breaking above 4.8% and approaching the psychological 5% threshold, and the 30-year breaking above 5.30%, means the anchor for global asset pricing is shifting upward. This affects not only U.S. mortgage rates and consumer credit costs, but also has far-reaching implications for capital flows to emerging markets, global equity valuations, and corporate financing conditions.
Bessent's statement in the Newsmax interview — "I'm making sure there are no major, severe adverse consequences" — may be the best footnote to the current policy dilemma: in the face of the torrent of fundamentals, the Treasury's buyback operations are more like dropping a stone into a rushing river, where the splash is quickly swallowed by the current.
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