Key facts
- Treasury Secretary Scott Bessent is defending the U.S. Treasury's intervention in the bond market.
- The Treasury has doubled its buybacks of U.S. Treasuries to at least $4 billion.
- The intervention aims to flatten the yield curve by buying long-term debt and selling short-term debt.
- Past "Operation Twist" implementations have had mixed success, often failing when monetary policy was too expansionary or when market participants disagreed with engineered rate moves.
- Bessent previously participated in the 1992 "Soros raid" on the pound.
Treasury Secretary Scott Bessent is defending the U.S. Treasury's intervention in the bond market, which has doubled its buybacks of Treasuries to at least $4 billion. This move is a new iteration of "Operation Twist," a strategy aimed at flattening the yield curve by purchasing longer-term debt while simultaneously selling an equal amount of short-term debt.
Bessent's participation in the 1992 "Soros raid" on the pound, which ultimately led to the devaluation of sterling, is noted as a historical parallel. The effectiveness of "Operation Twist" is contingent on market acceptance and alignment with monetary policy. Historically, such interventions have faced challenges, particularly when monetary policy proved too expansionary or when market participants disagreed with the engineered rate adjustments.
Previous U.S. implementations of "Operation Twist" by the Federal Reserve in 1961-65 and 2011 yielded mixed results. The 1961-65 attempt failed due to an overly expansionary monetary policy that fueled inflation. The 2011 attempt, part of quantitative easing, was aided by increased money growth, which helped stimulate economic recovery. The Bank of Japan's yield curve control policy from 2016 to 2024, despite significant bond purchases, is viewed as a failure.