Why? And why now?

Those were the main questions floating around markets a day on from the inauguration of what some are already calling the “Bessent Put” for US Treasurys.

Whatever you want to call Bessent’s upsized buybacks — other monikers included “QE Lite,” which isn’t very original, and “Special Military Operation Twist,” which pairs the Fed twist callback with Vladimir Putin’s much-maligned euphemism for the war in Ukraine to make a point about the Trump administration’s determination that the bond market won’t force an end to the Iran standoff — the message was clear enough.

“The particulars of the Treasury buyback itself are irrelevant,” Nomura’s Charlie McElligott said Thursday. “What matters is that it was a signaling exercise from Bessent that losing the long-end is a non-starter and that monetary and fiscal authorities are capitulating into a more activist posture as we move forward.”

Bessent’s buyback announcement came just weeks after he waded into the FX market to help Japan arrest the yen’s inexorable slide. One rationale for that adventure said he wanted to prevent a scenario where Japan sold down its Treasury pile (the world’s largest) to raise dollars for additional currency interventions.

In the same Thursday note, McElligott described (aptly) the flow of bearish long-end news as escalatory, which he said explains the urgency of the buyback announcement. Do note: The QRA was just two weeks ago. That’s when you’d announce upsized buybacks if you weren’t — and I’m not sure there’s another way to say this — panicking, at least a little bit.

“The mounting headwinds for the rates market were stacking in non-linear fashion, not just with [the] thematic crowding out phenomenon” as markets wondered how much duration private-sector balance sheets “can continue to absorb with the impulsive AI financing and corporate credit supply deluge,” but also as investors grappled with the implications of Japan’s predicament and the slower-moving term premia add-on from sovereign fiscal largesse and unchecked deficit spending,” Charlie wrote.

There’s the term premium chart again. Do note the comparison with the 2023 long-end scare. The modeled 10-year term premium is stuck at ~twice the late-2023 wides.

All of that, McElligott went on, is “amplifying already sticky-state inflation, particularly into the new world order where national security” concerns predominate.

On Thursday, Rabobank’s Michael Every weighed in on the geostrategic angle. “This isn’t focused on ‘lower yields’ as before, it’s part of an evolving US Grand Macro Strategy,” he said. “Bessent’s action shows the US is not going to allow a rise in long yields from stopping it acting versus Iran, just as past US wars had borrowing costs capped one way or another.”

The difference this time around, Every wrote, is that the US doesn’t control all the relevant physical supply chains. “This war is about trying to recapture them, from the upstream down, and to disrupt others’ access,” Every said. “While there may be 10 million barrels of oil a day coming through Hormuz secretly at night, the same cannot be said for refined products.”

McElligott hit on the same point. A fresh re-escalation in the Gulf “risk[s] a body blow to global industry and manufacturing [as] there’s no magic ‘release the inventories’ button to push [for] refined product outputs, because those degrade.”

So, are we inevitably on a path back to outright QE? Maybe. Very possibly. But not quite yet. “This statement of intent from [Bessent] transitions the big picture sequencing into slippery slope territory” and it’s possible that “YCC or even QE / LSAP will be the next required move, but things obviously have to get much worse first,” McElligott said.