Fox Business reporter Charlie Gasparino said on Aug. 25 that Wall Street executives familiar with the matter believe Bessent’s real goal is to 「make bond shorts fearful」 rather than reverse the longer-term trend in U.S. Treasury yields.
According to Gasparino’s account, the strategy is to push bond prices higher through Treasury buybacks, changes in issuance structure and even the removal of ultra-long-dated products such as the 20-year maturity. The aim, he wrote, is to trigger large passive short covering by commodity trading advisor, or CTA, trend funds and press the 10-year Treasury yield toward 4.3% before the midterm elections.
CTA short positioning is near historical extremes
The latest data cited in the report shows that CTA and trend-following strategy funds have built global bond-market short positions close to historical extremes. Measured by DV01, that positioning stands at about $155 million.
If bond prices rise by two standard deviations within one month, the combined scale of short covering and renewed buying could reach $150 million in DV01 terms. The report said that would mark a record high.
The reported objective is to buy time, not reverse the trend
Gasparino wrote that Bessent, a former trader, is operating in a setting where deficit reduction is seen as out of reach. In that context, the core of the strategy is described not as an attempt to overturn the yield trend, but as an effort to buy time by pressing on technical weak points in the market and building a lower-rate narrative ahead of the election window.
So far, the intervention has had limited success. Treasury yields kept moving higher until the Treasury disclosed that it could deploy as much as $954 billion from the Treasury General Account, or TGA, as support. Even then, yields only edged lower and the effect was brief.
Criticism and friction with the Federal Reserve
Critics argue that the size of the buyback effort is too small when set against large deficits, total debt and elevated inflation.
The report also points to deeper friction between the Treasury and the Federal Reserve. Bessent’s intervention is said to have left Federal Reserve Chair Warsh deeply dissatisfied and has noticeably cooled his willingness to reduce the Fed’s balance sheet. Market observers cited in the report say that, in practice, this has created a degree of balance-sheet linkage between the Treasury and the Fed.
The analysis cited by Gasparino says Bessent’s actions before the election could still set off a self-reinforcing short-covering loop and pull the 10-year yield toward 4.3%. After the midterm elections, though, structural upward pressure on yields and valuation gravity in equities could return more forcefully.