Bessent's efforts in the Treasury market so far haven't worked. Here's what else he can try

Treasury Secretary Scott Bessent insisted Thursday that he has multiple weapons at his disposal to quell liquidity problems in the government debt market and restore calm. While that's true in itself, a two-pronged effort he has deployed so far — accelerated buybacks and an effort to talk the market into accepting the rationale — have met with little success. The Treasury announcement Wednesday that it would at least double its bond buybacks starting in early September sent yields tumbling as investors applauded a backstop for longer-maturity government bonds. However, yields at the long end quickly rose again Thursday as market experts showed skepticism at whether the push would succeed against a bevy of factors working against Treasurys. Then on Thursday, Bessent appeared on CNBC with assurances that the intervention was merely aimed at providing market liquidity and not at trying to control the yield curve. While yields initially nudged lower, they quickly rebounded amid criticism of how the prior day's announcement was rolled out, leading one analyst to characterize the appearance as having "minimal impact" on the market pressures.

Still, that leaves Bessent with a variety of options that he may yet choose to deploy. "We have a big toolkit," the Treasury chief said. "Part of it is signaling here and to show that we believe that the yields don't reflect the underlying fundamentals." Yet markets are still worried, and criticism rose that the size of the buybacks, which Bessent confirmed could exceed $4 billion, would be rendered ineffective in such a large market. Evercore ISI analyst Krishna Guha called the plan "a weak form of Operation Twist," or a Federal Reserve initiative that swaps longer-term notes and bonds for short-term bills. The move "in itself will have little enduring impact and could backfire if it is seen as signaling concern about the ability to fund longer-term at acceptable cost," he said. The interview "had minimal impact on the bond market," he added.

That leaves Bessent with a handful of other options, none guaranteed to work and each carrying its own risk:

Bigger and more frequent buybacks : Bessent simply could say the initial round of stepped-up buybacks went so well that Treasury is going larger.

Smaller auctions : The department simply could cut down on the level of longer-dated debt it is issuing and shift it into shorter-term bills, an approach Bessent criticized strongly when it was employed by his predecessor, Janet Yellen.

Change the maturity composition of outstanding debt : This essentially would be a larger-scale version of smaller auctions and would require market participants to snap up shorter-duration — and lower-yielding — debt, a risky proposition. "Global investors know that struggling sovereigns often resort to shorter dated issuance. We think the US is different from all others, but it is not different without limit," Guha, who is Evercore's head of economics and central bank strategy, said in a client note.