Bessent’s Operation Twist: A Game Changer for U.S. Treasuries?

Bessent’s “Operation Twist” is rattling U.S. Treasury markets with a $4 billion buying plan.

Anatomy of the Operation Twist

Bessent is buying long‑term Treasuries while selling short‑term ones to bend the yield curve: lower long‑term rates, higher short‑term rates.

Past Operation Twist Trials

■1961‑1965: Fed’s first attempt collapsed as M3 surged from 3% to 10%.

■2011‑2012: Fed’s second trial succeeded, supported by M2 growth from 4% to 10%.

■2016‑2024: BOJ’s YCC experiment faltered because M2 stayed below 3%.

Intersection of Monetary Policy

Operation Twist only works if monetary policy is aligned; with expansionary policy, markets treat it as a temporary move and re‑balance portfolios.

Massive Money Growth and Its Impact

In the first half of 2026, M2 growth is nearing 10%. Without Fed tightening, Bessent’s interventions will likely have zero effect.

Why This Time Will Likely Fail

■Monetary Policy: No Fed rate hikes mean M2 continues to expand.

■Market Reaction: Investors anticipate higher long‑term yields and shift holdings.

■Secondary Factors: Deflationary pressure and global uncertainty push rates up.

Bessent’s Operation Twist may end up as a mere “show” if monetary policy doesn’t tighten; long‑term Treasury prices and yields will not move as intended.