By Daniel McGarvey, CFA on behalf of Stonebridge Financial Group advisors
On August 19, Treasury Secretary Scott Bessent announced the department’s plan to double the size of its long-dated bond buybacks from September 9th to November 4th. The decision has widely been interpreted as an attempt to rein in long term rates, and it has been referred to as the “Bessent Twist” because the purchases on the long end of the curve will be financed by issuing Treasury bills on the short end.
The 30-Year Treasury rate had hit 5.3% in the days before the announcement, which was its highest level in two decades and might have been seen as pain threshold for the economy because of the consequences for mortgages, corporate borrowing, and fiscal interest expense. There have been multiple factors driving up yields this year, including sticky inflation, higher expected nominal growth, ongoing geopolitical conflict, and a national debt that crossed $40 trillion. From a fundamental valuation standpoint, rising yields are likely justified.
The bond market tends to focus on fundamentals in the absence of large-scale intervention, which is why the relatively small buyback announcement has not successfully caused yields to drop yet. This is a case where the principle at play is more significant than the actual initial operation, however. Secretary Bessent indicated that he has additional tools available to “stabilize” rates, such as increasing the level of buybacks, drawing down the Treasury General Account, or reducing long-term issuance.
The threat of these tools, even if they don’t end up being used, could prevent yields from rising much further. This form of price management has been controversial because in practice it can act as a form of quasi-quantitative easing, and it poses the danger of suppressing the messaging power of rates without addressing the underlying factors driving them higher. It could also make the job of the Federal Reserve more difficult as it weighs whether to raise short-term rates.
It is worth keeping in perspective that the United States is not the only country with rising rates. As shown below, other major economies have had the same trend across the yield curve this year, showing that there might be global factors at play beyond just U.S. fiscal concerns.
Source: Strategas Research Partners LLC
Additionally, the U.S. might be one of the only countries that theoretically has the power to grow itself out of debt trouble through innovation and productivity. Doing so by fiscal austerity is unlikely in this environment given that the Iran war is dragging on, tariff revenue is being refunded, and we recently enacted large tax cuts.
The question of whether yields will continue rising or whether the Treasury will intervene enough to push them down is difficult to answer, but it makes the case for active management in bond portfolios. The opportunity set in the global bond market is vast, and there is value to be found beyond the long-term government bond space that the index has to own.
The S&P 500 was up 2.7% in August, backed by exceptional corporate earnings growth and signs of macroeconomic resilience. The Bloomberg Aggregate Bond Index returned 0.4% as the 10-Year Treasury Rate hovered in the 4.6-4.75% range.
Material discussed is meant for general/informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Past performance is no guarantee of future results. Diversification does not ensure against loss. The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions.
Source of three charts below: YCharts Inc.
September 2026 Commentary: Long Rates and the Bessent Twist
By Daniel McGarvey, CFA on behalf of Stonebridge Financial Group advisors
On August 19, Treasury Secretary Scott Bessent announced the department’s plan to double the size of its long-dated bond buybacks from September 9th to November 4th. The decision has widely been interpreted as an attempt to rein in long term rates, and it has been referred to as the “Bessent Twist” because the purchases on the long end of the curve will be financed by issuing Treasury bills on the short end.
The 30-Year Treasury rate had hit 5.3% in the days before the announcement, which was its highest level in two decades and might have been seen as pain threshold for the economy because of the consequences for mortgages, corporate borrowing, and fiscal interest expense. There have been multiple factors driving up yields this year, including sticky inflation, higher expected nominal growth, ongoing geopolitical conflict, and a national debt that crossed $40 trillion. From a fundamental valuation standpoint, rising yields are likely justified.
The bond market tends to focus on fundamentals in the absence of large-scale intervention, which is why the relatively small buyback announcement has not successfully caused yields to drop yet. This is a case where the principle at play is more significant than the actual initial operation, however. Secretary Bessent indicated that he has additional tools available to “stabilize” rates, such as increasing the level of buybacks, drawing down the Treasury General Account, or reducing long-term issuance.
The threat of these tools, even if they don’t end up being used, could prevent yields from rising much further. This form of price management has been controversial because in practice it can act as a form of quasi-quantitative easing, and it poses the danger of suppressing the messaging power of rates without addressing the underlying factors driving them higher. It could also make the job of the Federal Reserve more difficult as it weighs whether to raise short-term rates.
It is worth keeping in perspective that the United States is not the only country with rising rates. As shown below, other major economies have had the same trend across the yield curve this year, showing that there might be global factors at play beyond just U.S. fiscal concerns.
Source: Strategas Research Partners LLC
Additionally, the U.S. might be one of the only countries that theoretically has the power to grow itself out of debt trouble through innovation and productivity. Doing so by fiscal austerity is unlikely in this environment given that the Iran war is dragging on, tariff revenue is being refunded, and we recently enacted large tax cuts.
The question of whether yields will continue rising or whether the Treasury will intervene enough to push them down is difficult to answer, but it makes the case for active management in bond portfolios. The opportunity set in the global bond market is vast, and there is value to be found beyond the long-term government bond space that the index has to own.
The S&P 500 was up 2.7% in August, backed by exceptional corporate earnings growth and signs of macroeconomic resilience. The Bloomberg Aggregate Bond Index returned 0.4% as the 10-Year Treasury Rate hovered in the 4.6-4.75% range.
Material discussed is meant for general/informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Past performance is no guarantee of future results. Diversification does not ensure against loss. The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions.
Source of three charts below: YCharts Inc.
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