--- title: "\"Saving US Treasuries\" Relay: Bessent Stumbled Last Week, All Eyes on Warsh This Week" type: "News" locale: "en" url: "https://longbridge.com/en/news/296717810.md" description: "US Treasury Secretary Bessent expanded the scale of US Treasury buybacks to suppress long-end yields, but the effect was short-lived as market anxiety shifted toward gold and Bitcoin. The focus this week is on Federal Reserve Chair Warsh's speech at the Jackson Hole Symposium. Markets are closely watching his policy reaction function and statements on inflation, hoping to stabilize expectations and alleviate pressure on long-term interest rates" datetime: "2026-08-24T00:47:56.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296717810.md) - [en](https://longbridge.com/en/news/296717810.md) - [zh-HK](https://longbridge.com/zh-HK/news/296717810.md) generator: "portal-rs" --- # "Saving US Treasuries" Relay: Bessent Stumbled Last Week, All Eyes on Warsh This Week Bessent stepped in to save the bond market, but ended up boosting gold and Bitcoin—now, everyone is waiting for Warsh. Last week, US Treasury Secretary Bessent announced that he would at least double the scale of long-term US Treasury buybacks in an attempt to suppress persistently rising long-end yields. The effect was immediate but lasted less than a day—yields subsequently returned to high levels, remaining largely flat for the rest of the week. In a subsequent interview, Bessent stated that the market had "overreacted slightly" and emphasized that the Treasury Department possessed a "powerful toolkit." However, the market voted with its feet: the US dollar fell nearly 1% for the week, gold broke through $4,600, and Bitcoin surged more than 25% in a single week. Charlie McElligott of Nomura Securities characterized this combination as a "pressure release valve"—while authorities attempted to stabilize long-term interest rates, market anxiety vented itself elsewhere. ## This Week's Focus: Can Warsh Provide Answers? The baton has now passed to Federal Reserve Chair Warsh. He is scheduled to speak at the Jackson Hole Economic Policy Symposium this Friday. Since taking office in May of this year, Warsh has provided almost no forward guidance. His remarks following the last FOMC meeting directly triggered a sharp sell-off in the bond market—the market is extremely sensitive to what he says and how he says it. According to Bloomberg, traders are most eager to know: What exactly is the Federal Reserve's policy reaction function in the face of inflation stubbornly above the 2% target and deteriorating fiscal conditions? Molly Brooks, US Rates Strategist at TD Securities, warned: "If it's just the same old story, I think the market will be disappointed, which could exacerbate the long-end selling we have already seen." HSBC Rates Strategist Dhiraj Narula believes that **Warsh has an opportunity to soothe the market through his remarks: "If Chair Warsh can characterize the underlying inflationary pressures, in our view, this would be sufficient to provide some basis for reducing the term premium associated with uncertainty."** Michael Ball, strategist at Bloomberg Markets Live, stated: **Bessent can adjust the debt maturity structure, but only the Federal Reserve can anchor inflation expectations.** Warsh's Jackson Hole speech must reaffirm that the 2% target is still achievable and make a clear statement—that if inflation persists, policy action will be taken even if it causes friction with the administration. ## Why Was Bessent's Move Insufficient? Peter Tchir of Academy Securities pointed out that the US government currently has $7.5 trillion in short-term Treasury bills (T-bills) and $21.7 trillion in coupon-bearing bonds outstanding. Bessent's buyback operations are "at least $4 billion" each, occurring nearly once a week—doubling from the previous $2 billion to $4 billion sounds impressive, but it fundamentally failed to sustainably shake the market. Tchir judged that this is not QE (Quantitative Easing). Bessent's operation is essentially just "rearranging the deck chairs," without truly creating money. The market reaction of rising gold and a falling dollar reflects more of an overinterpretation of the "currency devaluation" narrative rather than a genuine expansion of the money supply by the Treasury. There is also a little-known but crucial data point: the Federal Reserve currently holds more than 50% of all US Treasuries maturing in 10 to 15 years. This is quite far from a "free market." Meanwhile, the Fed's holdings of long-term bonds also approach 20%. Even more paradoxical is that the Fed still holds nearly $426 billion in coupon-bearing bonds maturing within one year, with an average coupon of only 2.9%, while the current effective federal funds rate is 3.63%—the Fed is continuously losing on the interest rate spread with these holdings. ## "Operation Twist": Can the Fed Save What Bessent Cannot? This background has sparked heated market discussion about a long-dormant tool: the Federal Reserve's version of "Operation Twist." The logic is not complex: If the Fed sells those $426 billion in short-term bonds and instead buys long-term bonds of 20 years or more with the same nominal scale, although it would incur an initial book loss, it could gain considerable spread income (approximately 5.25% holding yield versus a 3.63% cost of funds). More importantly, this would absorb more than 15% of the circulation of bonds with maturities over 20 years, effectively suppressing long-end yields. From Warsh's perspective, "Operation Twist" is not QE because it does not change the total nominal scale of bonds held by the Fed. This is politically easier to accept. Tchir's judgment is that if the White House truly wants long-end yields to decline, it must abandon the "small-scale maneuvers" within Bessent's control and instead push for the Fed to fully intervene with Operation Twist. Bloomberg analyst Ball holds a similar view: Bessent's plan is increasingly resembling a "lightweight version of Operation Twist"—the Treasury exits long-duration debt through buybacks, shifting to short-term bills and short coupons; the Fed then purchases short-term bills through reserve management, absorbing front-end supply without expanding its balance sheet. But this combination has inherent contradictions: the higher the proportion of short-term financing, the greater the Treasury's exposure to policy rates. Once inflation forces the Fed to raise rates, interest costs will reset at a faster pace; and if the Fed hesitates due to concerns about fiscal costs, the market will punish its independence with a higher term premium. Therefore, either the Fed steps in to support Bessent, or this intervention will end in failure—and failed interventions are often more harmful than no intervention at all. ## Data Window: Wednesday's PCE Preliminary Probe Before the Jackson Hole speech, the market will face another important data node—the July Personal Consumption Expenditures (PCE) index released on Wednesday. According to Bloomberg, over the past month, inflation, employment, and retail sales data have been in line with or below expectations, prompting traders to lower their expectations for near-term rate hikes. If the PCE data continues this trend, it may provide some buffer space for Warsh's speech. **However, the window of opportunity is narrowing. Bloomberg analysis points out that political pressure from the midterm elections, combined with the Bureau of Economic Analysis' update to PCE statistical methods at the end of September, could make tightening operations after the September FOMC meeting increasingly complex in terms of political perception.** ## 5% Is Key, Doubts Remain on Sustainability of Devaluation Trade Wallstreetcn reported that Bank of America strategist Michael Hartnett views the 30-year US Treasury yield of 5% as a critical dividing line, believing that if it fails to break below this level, it will exacerbate pressure on the US dollar and highly leveraged sectors—including AI hyperscale computing companies and private credit. Bridgewater Associates founder Ray Dalio issued a warning last Friday, advising investors to reduce bond exposure and hold gold and some Bitcoin to guard against a potential US debt crisis. This pressure is not unfounded. Bloomberg noted that **as the Iran conflict continues to simmer, fiscal prospects are drawing increasing market attention; meanwhile, a surge in bond issuance by AI-related companies is competing with US Treasuries for the same pool of capital; foreign investors' demand for US Treasuries is also becoming increasingly "price-sensitive," with decreasing tolerance for current policy directions.** Risk Warning and Disclaimer The market carries risks; investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. 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