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US Treasury bond buyback program and policy tensions

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2026-09-28 05:33 UTC → 2026-09-30 04:06 UTC · added ~~removed~~

U.S. Treasury Secretary Scott Bessent has expanded the government’s bond-buyback program, doubling the scale of repurchases for long-dated securities from $2 billion to at least $4 billion per operation. The initiative targets bonds with maturities between ten and thirty years to provide liquidity and address long-term yields that had reached 19-year highs. Bessent has recently urged the Federal Reserve to maintain an ‘open-minded’ approach to interest rate decisions. Speaking on Fox News, he suggested the central bank should avoid a purely mechanical process, noting that deregulation and AI-driven productivity gains could assist in managing inflation. This stance follows a mid-September rate hike that brought interest rates to a range of 3.75% to 4%, with many Fed officials signaling that further hikes may be necessary as inflation remains high. The expansion has drawn criticism from investors such as Stanley Druckenmiller, who argued that the intervention attempts to manipulate bond prices rather than addressing underlying fiscal issues. Additionally, Howard Marks of Oaktree Capital Management expressed a preference for less activist communication from the Federal Reserve, arguing that excessive signaling can create market dependency and systemic risks. This fiscal strategy coincides with a shifting relationship between monetary and fiscal policy. Federal Reserve Chair Kevin Warsh recently signaled a departure from previous years where monetary policy often supported fiscal needs. Speaking at Jackson Hole, Warsh moved away from forward guidance, stating the central bank’s understanding of the economy is not precise enough for “mechanical mathematical rules,” while maintaining that the 2% target on the personal consumption expenditure (PCE) deflator remains a “firm fixed target.” Bessent’s influence on long-term interest rates has recently come under scrutiny. Economist Paul Krugman has criticized the Treasury Secretary, arguing that attempts to manipulate the bond market have failed to contain rising long-term yields.

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