It’s just past 1pm in New York as I write this.

• $BRR up 10.2%
• Gold up 3.4%
• Bitcoin up 5.7%
• Silver up 3.4%
• 10-Year Treasury yield down 3bp (.03%)
• 30-Year Treasury yield down 7bp (.07%)

That’s a lot of volatility in assets that typically aren’t very volatile. It’s also a lot of volatility for $BRR and Bitcoin which are volatile. The reason is Treasury Secretary, Bessent, announced that the US Treasury will double its purchases of long-dated securities. They will buy back 10-year – 30-year securities at double the current $2B rate (to $4B+). That will add up to tens of billions of dollars of repurchases.

There’s currently a heated debate on X whether this amounts to another round of Quantitative Easing (QE) or not. There’s a debate on whether it counts as yield curve control (YCC). Some are even dismissing it as irrelevant because the total amount of debt won’t change. The Treasury will issue shorter-term securities to fund the purchase of longer-term ones. While it’s technically true that the amount of debt won’t change, the movement in dollar alternatives is telling us that Bessent’s action isn’t irrelevant.

I’m going to skip the convoluted discussion of whether this is QE or Not QE. I’m also going to concede that the total amount of Treasury debt will be unchanged. The market is moving for two reasons.

First, this is exactly what Janet Yellen did. She reduced issuance of longer-dated higher-yield Treasuries and increased the supply of shorter-dated lower-yield Treasuries. The issue with that approach is it leaves the balance sheet more exposed to short-term movements in the bond market. It also increases the total size of Treasury auctions. If you sell $1T of 10-year debt, you don’t have to refinance that for a decade. If you sell $1T of 1-year debt, you have to keep rolling that debt each year, increasing the amount you’re selling in each auction. Yellen’s actions were so extreme that Bessent had to refinance $7T in his first year. That’s a lot of supply into static demand.

Second, trying to manipulate long-term Treasury rates is a sign of distress (if not panic). A well-functioning market doesn’t require tens of billions of dollars of illiquid repurchases to try to move long-term rates by a few basis points. This was the direction Japan went a few years ago when there were entire months where the only purchaser of Japanese government bonds was the Bank of Japan. Since then, the BoJ has spent hundreds of billions of dollars of its foreign currency reserves unsuccessfully defending the yen. These actions work very well in the short-term and not at all in the long-term.

The market is responding to this and shifting out of the dollar and into harder assets.

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