Original title: (To save U.S. Treasury bonds in the “Soros style”! From exchange rates to interest rates—can Bessent beat the market?)
Original author: Long Yue, Wall Street News
A man who once helped Soros bring down the Bank of England is now looking to use the same playbook to protect the U.S. Treasury market?
Since the beginning of this year, U.S. Treasury Secretary Scott Bessent has made consecutive moves. Through a series of unexpected market maneuvers, he has staked his credibility on suppressing the cost of U.S. borrowing. According to Bloomberg, he has become “the most actively interventionist Treasury Secretary in decades.”
After the U.S. and Japan coordinated to intervene in the yen, Bessent’s latest move is to expand Treasury buybacks of U.S. debt. The Treasury announced it will “at least double” the buyback size for 10- to 30-year Treasuries—yet this buyback plan was only made public two weeks earlier. On the day the news broke, the 10-year Treasury yield fell by about 6 basis points and the 30-year fell by nearly 9 basis points, while the U.S. dollar index dropped to a three-month low.
The market’s reaction confirmed Bessent’s judgment. He had previously said publicly, “My job is to be the top bond salesman in the country, and U.S. Treasury yields are the barometer of whether we’re succeeding.”
From a pound short to a gatekeeper in the bond market
To understand Bessent’s playbook, you have to go back to 1992.
That year, the then-just-in-his-twenties Bessent worked at Soros’s fund and helped build a short position in the British pound. “Black Wednesday” forced the pound out of the European Exchange Rate Mechanism, and Soros netted more than $1 billion. According to media reports, a former adviser described Bessent at the time as someone who “could see market fragilities that others couldn’t.”
After that, he returned to working with Soros as chief investment officer. In 2013, he also led a $1 billion Japanese yen short, once again reaping hefty returns. In 2015, he founded Key Square Capital Management with $4.5 billion, betting that both Brexit and Trump’s election win would succeed—and both did.
This set of “find the cracks and push along the seams” hunter logic runs through his entire hedge fund career.
Now, he wants to use the same intuition to do the exact opposite—defend a market under pressure.
This year’s intervention map: from the yen to U.S. Treasuries
This year, Bessent’s actions have already formed a clear chain of logic.
Step one: yen intervention. On July 31, the U.S. Treasury, together with Japanese authorities, entered the market to buy yen. This was the first time the U.S. had directly intervened in the yen exchange rate in nearly three decades. According to data from the Peterson Institute for International Economics (PIIE), during the last two days of July, Japan used about $87 billion of foreign-exchange reserves to buy yen. The U.S. Treasury “joined in at the final stage, with a relatively limited funding size, but released an important signal of political support.” Notably, the Treasury sold euros rather than dollars, and it had not informed the euro zone authorities in advance.
Behind this is a hidden thread: Japan holds about $1.1 trillion in U.S. Treasuries, the largest overseas holder. If Japan had to finance the intervention on its own, it might be forced to sell U.S. Treasuries, pushing up long-end yields even further. Washington’s involvement meant Japan sold fewer Treasuries—indirectly helping preserve the yield curve that Bessent cares about most.
Step two: a signal of contraction at the bond-issuance end. Early this month, the Ministry of Finance hinted it may cut back the scale of long-term bond issuance, sending the market expectations of tighter supply.
Step three: step up buybacks. This week, it was announced that the size of long-term debt buybacks will be at least doubled, directly supporting prices from the demand side.
Bloomberg cited Christofferson Robb & Co. portfolio manager Brad Golding saying it was like an “old-school ‘clear the screen’ technique”—a hedge fund method that simultaneously places orders with multiple large dealers, triggering major volatility in the market.
Former U.S. Treasury official Mark Sobel, now at the OMFIF research institution, told Bloomberg: “He’s absolutely an activist—this brings to mind his hedge fund background.” “And he and this administration are clearly concerned about rising long-end yields.”
Breaking “rules and predictability”
Bessent’s moves directly clash with the Treasury’s traditional principles.
For a long time, the U.S. Treasury has adhered to debt-management principles of being “rule-based and predictable,”不给市场意外. Last November, Bessent himself publicly endorsed this principle at a Treasury market meeting.
But now, his actions have already departed from that promise.
Gregory Faranello, head of U.S. rate trading and strategy at AmeriVet Securities, told Bloomberg: “This goes against the principle of ‘rule-based and predictable’—but that’s the world we’re in.” “The signal is clear: stop yields from rising.”
More ironically, Bessent’s predecessor, Janet Yellen, also suppressed yields in 2023 by adjusting the structure of debt issuance. At the time, Bessent was one of the critics, accusing the move of being politically motivated. Stephen Miran, Trump’s former chief economist, also co-authored a paper in 2024 that criticized “aggressive Treasury debt operations” (ATI).
According to Bloomberg, in their paper Miran and Nouriel Roubini wrote: “Once a political party starts using ATI stimulus in election season, all future administrations may follow suit.”
Question: Can intervention solve structural problems?
The market reacted to Bessent’s moves in the short term, but economists’ doubts run much deeper.
As of the first ten months of fiscal year 2026, federal net interest expenditures have reached $963 billion, about $3.18 billion per day—up 14% year over year. The 10-year Treasury yield is 4.72%, and the 30-year is 5.31%—a large stock of old debt issued at below 2% is being rolled over at higher rates. With a deficit of $1.8 trillion so far in fiscal year 2026, up 5% from the previous year, spending on Social Security, Medicare, defense, and debt interest is all rising, while Republicans are also discussing further tax cuts.
Robin Brooks, a senior fellow at the Brookings Institution, said bluntly to Bloomberg: “This isn’t about solving the fundamental problem—cutting debt and shrinking the fiscal deficit. It’s an attempt to manipulate the yield curve.”
BNY macro strategist John Velis also said: “Given current spending policies and the war, easing pressure on the long end will be very difficult.”
The effectiveness of the yen intervention is also questionable. After the dollar-yen pair hit a high of 163.98 on July 23, it had retreated to 159.43 by August 17. But according to CNBC, the intervention has not prevented the yen’s continued weakening. PIIE’s Maurice Obstfeld said directly that the intervention has had little effect, adding: “Foreign exchange intervention is not a free lunch—even a free cake doesn’t count.”
Guy Miller, chief strategist at Zurich Insurance, told Bloomberg: “This approach can only work for a while. When the Treasury makes it clear it intends to keep intervening, it can indeed have a fairly strong effect. But in the end, if you don’t address reckless fiscal policy, it’s not sustainable.”
Peter Boockvar, chief investment officer at Onepoint Bfg, was even more direct: “He’s fighting two giant markets at the same time—U.S. Treasuries and foreign exchange—this is an extremely difficult campaign.”
A bet on credibility
Bessent’s logic is already very clear in his own words. Last month, when discussing the Trump administration’s holdings in technology and resource companies, he said: “What we’re trying to do is create market signals.” On Fox Business, he said: “At its core, it’s telling investors where the hockey puck is going—so they can skate there fast.”
The issue is that in 1992, shorting the pound was about finding an institutional weakness and striking while the iron was hot. Now, he faces structural pressure driven jointly by budget deficits, inflation expectations, and Federal Reserve policy—things that cannot be fundamentally changed by buyback operations or currency interventions.
According to Bloomberg, Mark Sobel—who worked at the Treasury for nearly 40 years—said that Bessent is at least the most aggressive Treasury secretary since the early part of this century. But he also described the yen intervention as an unwise move, saying it avoids the fiscal integration the U.S. truly needs.
Original link