U.S. Treasury Plans Increased Intervention to Lower Yields, Will Directly Buy Bonds When Central Bank Cannot Cut Rates
The Kobeissi Letter points out that despite multiple announcements of impending intervention by the Treasury, yields have not fallen. Measures include at least doubling the repurchase size to over $4 billion per event and considering the use of approximately $950 billion from the Treasury General Account (TGA) to fund purchases.
Reports indicate that Treasury Secretary Mnuchin will lower yields "at all costs," which may include increasing the issuance of short-term debt and canceling some long-term Treasury bonds, in addition to repurchases. President Trump even mentioned on Friday night the possibility of using the military to lower yields, though the specifics are unclear. The view is that the Federal Reserve finds it difficult to cut rates in the current environment, making direct intervention in the bond market the only way to lower rates in the short term, and it is advised to "not go against the Treasury."
In terms of market mechanisms, event-driven expectations for policy intervention are heating up. Funds are flowing into long-term U.S. Treasuries and related assets, benefiting bond bulls and interest rate-sensitive sectors, while putting pressure on bears and those shorting the long end with high leverage. Large-scale repurchases and the use of TGA may change liquidity and the shape of the yield curve.
Source: Public Information
ABAB AI Insight
The Treasury is attempting to directly intervene in long-end yields by expanding repurchases and considering the use of TGA cash balances. Mnuchin's statement of "at all costs" and the possible combination of tools (repurchases, adjustments in short-term issuance, cancellations of long-term bonds) demonstrate the administration's willingness to actively intervene in the bond market. Trump's related remarks further reinforce the signal of policy determination.
In terms of capital pathways, the government influences market pricing through its cash accounts and issuance structure adjustments, similar to unconventional bond market operations in history. We are currently in a phase where the boundaries between fiscal and monetary policy are blurred, and expectations for direct intervention are heating up.
This is analogous to past Treasury reversal operations and large-scale repurchase cases.
Essentially, this represents a regulatory change. The mechanism is that when traditional interest rate tools are constrained, the Treasury directly absorbs long-end supply through balance sheet operations, using administrative power to change market supply and demand and expectations.
ABAB News · Cognitive Law
When the central bank cannot cut rates, the Treasury will directly buy bonds.
Once "at all costs" is stated, bears must recalculate their risks.
Do not go against those who control the printing press and cash accounts.