Scott Bessent doubled the ceiling on Treasury’s long end buyback operations on 19 August, and within a day the framing settled: Treasury is suppressing long yields, Kevin Warsh is fighting inflation and shrinking the balance sheet, and the two are colliding.
I think the collision everyone’s describing doesn’t exist in the flows. Something larger does, and it sits at the opposite end of the curve.
Below the paid line:
- The Desk’s full month by month bill purchase table, December 2025 to September 2026, $355 billion planned, and the moment reserve management purchases went to zero
- The H.4.1 line by line, both dates, showing bills at more than 100% of the growth in the Fed’s Treasury book
- The TGA at $933.2 billion and the Desk sizing rule that makes Treasury’s cash balance an input to Fed open market operations
- The TBAC charge, in which Treasury’s own advisory committee prices $540 billion of Fed bill buying and tells Treasury it can raise the bill share without the private market absorbing it
- The 2000-02 buyback programme that moved yields 95bp, and why its budget-surplus funding means it cannot repeat against $739 billion of net new borrowing
- Three confounds I cannot rule out, including the one that would most weaken this piece
