Blog: Bessent Tries to End Run the Fed
Manipulating the bond market is doomed to failure.
The phrase "desparate times require desparate measures" has its origins in Hippocrates. Around 400 BC, the ancient Greek doctor wrote: "For extreme diseases, extreme methods of cure, as to restriction, are most suitable." Over time, the medical origins have been largely forgotten and the phrase has been generalized to mean any desparate situation.
The administration in Washington appears frustrated that the Fed is not reducing rates. So, in a desparate attempt to bring down long rates, the US Treasury tried a little market manipulation. 10 and 30 year treasury rates are set by the market, not by the Fed. And though the short-term rates the Fed does control can influence the long end, attempts to directly influence long rates have generally failed. The Bernanke/Yellen/Powell attempts to control the long end through "Quantitative Easing" have only a large portfolio of bonds to show for it. While buying long term treasuries can have a short-term impact, the long treasury market is so huge that it does not lend itself to outside manipulation. Despite that experience US Treasury Secretary Scott Bessent decided to try his hand at it. The outcome was much the same as past attempts. A dip on Wednesday and by Friday rates were back where they started.
Why does this happen?