The U.S. Treasury can temporarily lower the long-end rate of return, but it's hard to fight the market in the long term

TS Lombard, a consulting firm for macroeconomic forecasting, argued that the United States Department of the Treasury could do so in a more short-term way if it increased short-term debt issues and bought back long-term debt at the same time. The current frequency of long-term buy-backs driven by Finance Minister Besent is close to three times a month, and the single maximum has doubled to $4 billion, which remains small relative to the overall United States debt market. Even further time-bound restructuring of a similar distorting operation (Operation Twist, where the central bank or the finance ministry sells short-term debt and buys long-term debt) can have a rapid decline. Looking back at the distorting operations of 2011-2012, it was true that the long-end rate of return and curve of the policy roll-out did initially go down significantly, but after a few months the fundamentals again dominated and the impact of the second round was weaker. In general, ministries of finance have the tools and the means to manufacture a phased change in supply and demand, but not a real change in the long-term premium, and global capital flows and macro fundamentals will eventually rebalance. If investors consider long-term debt to be insufficient to compensate for inflation risks, or if the value of bonds as stock hedges falls, the demand generated by Treasury buy-backs will ultimately be offset by reduced allocation by private investors. (KIM XAPP)