“True knowledge is knowledge of why things are as they are, and not merely what they are.” – Isaiah Berlin ||
Hello everyone! I hope you’re all doing well and taking care of yourselves.
It looks like crypto markets are getting interesting again… 👀
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IN THIS NEWSLETTER
The Treasury Twist accelerates
Term of the day: yield curve control
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WHAT I’M WATCHING:
The Treasury Twist accelerates
Finally, we got a reaction.
Over the past few weeks, US long-term yields have been climbing and climbing, with the 30-year reaching its highest level since 2007 and no obvious catalyst on the horizon to bring them back down other than a market crisis or official intervention.
For now, we have the latter, in the hopes it will stave off the former – but the underlying problems remain.
What happened
Yesterday, the US Treasury announced that it was raising the maximum amount of bond buybacks from $2 billion per operation to “at least” $4 billion, from September 9 to the end of the current refunding quarter on November 4. (I’m not sure how a maximum can be “at least” a given number, but moving on…)
This move came just two weeks after the publication of the Treasury’s Quarterly Refunding Statement, which confirms it is an unplanned reaction to the market rather than part of a planned strategy.
The timing may have been a surprise, but the move itself is not: last year, Bessent said that bond buybacks were part of the department’s “big toolkit”, to be rolled out if needed.
Still, it’s unusual and significant which means there are a lot of bad takes and misinformation swirling around. So, here’s a breakdown of what it isn’t, what it is, and why it matters for markets.
