Treasury Secretary Scott Bessent has mentioned many times that he wants to see lower rates on Treasury bonds, and he’s managed a number of efforts to achieve that goal. The latest is buying back bonds with funds from the Treasury’s General Account (TGA). CNBC’s Steve Liesman details Bessent’s plans, writing:
Bessent in the CNBC interview called the operation a “Treasury Twist,” a reference to a government or Federal Reserve operation where long-term Treasurys are bought and paid for with short-term issuance. That also implied that short-term bonds would be sold.
But since the surprise announcement, bonds have retreated from an initial rally, sending yields higher, in part because of skepticism voiced by many market analysts about how effective the operation would be and whether the Treasury’s resources were too limited.
Using the TGA could change that perception. The TGA is essentially the government’s checking account, a rainy day fund of sorts held at the Federal Reserve. It is already funded with existing tax collections. Bessent has built up the TGA to around $950 billion currently, compared with a stated goal under the Biden administration of around $550 billion to $600 billion.
The officials would not say how much, if any, of the TGA would be used or when such an announcement could be made. There was no implication it could be used beyond the purchase of off-the-run securities that were the focus of last week’s announcement.
But they were clear that it is considered to be available.
Action Line: Bessent wants lower rates, and if those lower rates are realized, they’ll cascade through other areas of the economy like corporate and personal loans. Keep your eye on the Treasury yield curve. When you want to talk about bonds in your portfolio, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
