WASHINGTON (Realist English). Treasury Secretary Scott Bessent’s decision to double the size of long‑term Treasury buybacks has triggered an immediate collapse of the dollar to its lowest levels since May.
The Bloomberg Dollar Spot Index fell about 0.8% in a single session, touching 98.708 – a three‑month low. The 30‑year Treasury yield plunged nearly 10 basis points to 5.18% , retreating from Tuesday’s 19‑year high of 5.337%.
Citigroup and Deutsche Bank warn that the attempt to suppress borrowing costs at the expense of the national currency could have long‑term consequences for the US economy and the dollar’s status as the world’s reserve currency.
The intervention
On 19 August, the Treasury Department announced it would at least double its buyback operations for long‑term securities – from $2 billion to $4 billion per operation. The measures take effect from 9 September and will remain in place at least until November.
The programme was formally launched in 2023 to enhance market liquidity. However, as Bloomberg notes, the unexpected expansion is “the most concrete evidence yet” that the recent sell‑off in long‑dated debt is causing serious concern at the Treasury.
Market reaction: dollar plunges, yields drop
The immediate result was a sharp drop in long‑term yields and a rout in the dollar:
| Indicator | Before Intervention | After Intervention | Change |
| 30‑Year Treasury Yield | 5.337% | 5.18% | -15.7 bps |
| Bloomberg Dollar Index | 3‑month high | 3‑month low | -0.8% |
Source: Bloomberg, trading data
The dollar fell against all G10 currencies. The yen, Swiss franc and New Zealand dollar were among the biggest gainers.
ING strategist Chris Turner noted that the Treasury’s decision “boosted risk appetite” and “weakened the dollar’s safe‑haven status,” supporting emerging market currencies. According to him, if the risk rally continues, the DXY could test 98.65.
The price: why the dollar became the casualty
Citigroup strategists led by Dirk Willer warned that efforts to contain yields “are likely to keep pressure on the greenback.” “The main cost of lowering rates this way is currency weakness,” they wrote.
Deutsche Bank went further, calling the intervention a form of “soft‑form financial repression.” If Treasury prices are not allowed to adjust lower, the adjustment must come through a weaker dollar for foreign holders of US debt.
As The Wall Street Journal notes, Bessent is “increasingly settling into the role of the government’s chief bond trader,” and his actions represent the “most radical intervention” in decades. Some investors now view Bessent as the most interventionist Treasury chief in decades.
Risks: inflation, the Fed and elections
Experts identify three key risks:
| Risk | Description |
| Inflationary pressure | A weaker dollar makes imports more expensive, which could accelerate inflation and increase the cost of servicing the $32.2 trillion debt |
| Pressure on Fed independence | Populist logic could demand the central bank support fiscal goals, creating market distortions |
| Political undertones | Measures introduced two months before elections; high mortgage rates (~7%) represent a “potential problem” for Republicans |
RSM chief economist Joseph Brusuelas warned: “We are gradually approaching the point where the logic of populism will insist that the central bank support fiscal goals.” The intervention, he said, “will create market distortions and complicate life for Kevin Warsh” – the Federal Reserve chairman.
Expert view: ‘Bessent is playing with fire’
A chief currency strategist at ING’s London office said:
“Bessent has found himself in a trap. He needs to bring down bond yields to lower borrowing costs for the economy and the government before the elections. But the only available tool – buying back long‑term bonds – automatically weakens the dollar.
“And a weak dollar means more expensive imports and the risk of reigniting inflation. It’s a vicious circle: the more actively he intervenes, the more problems he creates for the Fed and for his own goal of reducing the deficit. The question is how long he can maintain this balance before markets start demanding an even higher risk premium.”
Analysis: temporary relief or the start of a long‑term trend?
Bessent’s intervention had an immediate effect: the bond market calmed, yields fell and stocks rose.
However, critics call it a temporary band‑aid. At a steady pace of $4 billion per operation, the Treasury will buy back about 30% of expected annual issuance in the 10‑ to 30‑year segment – but only 2.4% of the total outstanding debt in that range.
As Brandywine Global portfolio manager Jack McIntyre noted: “They need to try something. Sentiment around the long end of the global bond market is as bearish as I’ve seen in a very long time.”
However, he added: “What really lowers long‑term rates is an economic slowdown or a resolution of the Iran conflict – and I’m not sure we’re there yet.”
The key question for investors is whether the dollar’s weakness is a temporary price for saving the bond market – or the beginning of a longer trend that calls into question the dollar’s status as the world’s primary reserve currency.
