--- title: "Bessent's Bond Market Intervention Casts Shadow on Warsh's Call for Markets to 'Follow the Data'" type: "News" locale: "en" url: "https://longbridge.com/en/news/296546459.md" description: "The confusion over policy signals triggered by Bessent's announcement of expanded Treasury repurchases has directly impacted the new communication framework recently established by Fed Chair Kevin Warsh. Warsh had urged markets to base their actions on economic data rather than the Fed's own interest rate forecasts, while the Fed also uses market prices as a reference for economic assessments. Meanwhile, analysts point out that if the U.S. Treasury successfully suppresses long-end yields, it could force the Federal Reserve to restart interest rate hikes" datetime: "2026-08-20T23:48:36.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296546459.md) - [en](https://longbridge.com/en/news/296546459.md) - [zh-HK](https://longbridge.com/zh-HK/news/296546459.md) generator: "portal-rs" --- # Bessent's Bond Market Intervention Casts Shadow on Warsh's Call for Markets to 'Follow the Data' U.S. Treasury Secretary Scott Bessent's intervention to lower long-term borrowing costs is adding new variables to the Federal Reserve's policy decisions. Bessent announced an expansion in the scale of long-term Treasury repurchases, causing the yield on 30-year Treasury bonds to drop in response. However, the market rebound lasted only one day, with yields subsequently rising back to pre-announcement levels, reflecting deep skepticism from outsiders about the actual effectiveness of this move. At the same time, **the confusion over policy signals triggered by this move has directly impacted the new communication framework recently established by Federal Reserve Chair Kevin Warsh.** For the market, this situation involves two layers of risk: **If the Treasury successfully suppresses long-end yields, loose financial conditions will contradict the current still-high inflation situation, forcing the Fed to restart interest rate hikes; if the intervention is ineffective, the pressure of rising borrowing costs caused by debt expansion will continue to trouble policymakers.** ## Warsh's "Follow the Ball" Framework Under Pressure Warsh made his stance clear at the press conference following the July monetary policy meeting, urging investors to base their actions on economic data rather than the Fed's own interest rate forecasts. **"Market participants are learning to follow the ball, not stare at the referee—market prices will continue to react in the direction and magnitude they deem appropriate," he said.** The core logic of this framework is to let market prices serve as unfiltered signals, providing the Fed with an independent reference for economic judgment. However, Bessent's repurchase operation has directly interfered with this signal chain. "This is clearly inconsistent with the market 'follow the ball' concept advocated by Warsh," said Stephanie Roth, chief economist at Wolfe Research. **"In theory, this blurs the signals we get from the market, which the Fed is said to be increasingly relying on."** Krishna Guha, Vice Chairman at Evercore ISI, pointed out in a research report that Bessent's move will dilute Warsh's policy guidance that "the market can independently form economic and monetary policy judgments without any hints from the Fed." "When investors see Bessent trying to manage the long end, this argument becomes hard to sustain," Guha wrote. ## Bessent: Repurchases Unrelated to Rate Hike Decisions Bessent pushed back against external criticism in an interview with CNBC, denying that this intervention would affect the Fed's interest rate hike judgments. "This has nothing to do with the repurchase decision I announced this week," he said. **"Part of this is sending a signal that we believe current yield levels do not reflect fundamentals."** However, critics argue that this operation does not address the root cause of rising long-term borrowing costs—the continuous expansion of U.S. debt. The total U.S. public debt has exceeded $40 trillion for the first time, surging by one-third in less than five years, with the public showing little willingness to cut spending. San Francisco Fed President Mary Daly adopted a cautious tone in an interview on Thursday, "It is still early stages, and I do not want to comment prematurely before we have had a chance to think deeply about these issues." ## Divergence on Rate Hikes Emerges Within the Fed The Treasury's move comes during a delicate policy window for the Federal Reserve. According to the minutes of the Federal Open Market Committee (FOMC) meeting from July 28 to 29, several officials supported raising interest rates at last month's regular meeting, with many stating that further tightening of policy would be necessary if inflation failed to decline. Subsequent economic data showed signs of cooling, alleviating some pressure for rate hikes to a certain extent: July retail sales saw their largest month-on-month decline in over a year, and core inflation also retreated. Kathy Bostjancic, chief economist at Nationwide, stated that she does not believe the Treasury's move will complicate the Fed's interest rate outlook, "but the irony is that Chair Warsh emphasizes that he places great importance on 'unfiltered' feedback from the market." ## If Yields Are Successfully Suppressed, Need for Rate Hikes May Rise Some analysts warn that if Bessent's operations prove effective, they could instead force the Fed to adopt a tighter stance. Blake Gwinn, Head of U.S. Interest Rate Strategy at RBC Capital Markets, pointed out that **if one of the reasons previously supporting a pause in rate hikes was that long-end interest rates were "tightening financial conditions on behalf of the Fed," then once yields drop significantly due to Bessent's actions, "in theory, the necessity for rate hikes should rise."** Ultimately, the effectiveness of this intervention remains unknown. Supporters characterize it as a flexible move to limit financing costs against the backdrop of soaring global Treasury yields; skeptics, however, believe that against the background of continuously expanding debt scales, any technical operation is difficult to fundamentally change the market's judgment on the U.S. fiscal trajectory. ### Related Stocks - [EVR.US](https://longbridge.com/en/quote/EVR.US.md) - [RY.US](https://longbridge.com/en/quote/RY.US.md) ## Related News & Research - [Trump’s Bond Buyback Push Puts Kevin Warsh in a Tough Spot — Peter Schiff Says Treasury ‘Pulled the Rug Out From Under’](https://longbridge.com/en/news/296615127.md) - [Bessent stops short of new bond measures amid report US Treasury may tap cash pile for buybacks](https://longbridge.com/en/news/296859051.md) - [Trump says he did not direct Bessent to intervene in bond market](https://longbridge.com/en/news/296658410.md) - [US Treasury buybacks a 'mistake' costing credibility, says Druckenmiller](https://longbridge.com/en/news/296868961.md) - [Bossing the bond market around never works](https://longbridge.com/en/news/296696398.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**