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The Real Eisman Playbook · 4 min · Oct 26, 2026

A small Treasury operation could not bluff the bond market

Benn Steil · Director of International Economics, Council on Foreign Relations

Benn Steil explains why Bessent’s $6 billion Treasury swap was too small to move a $40 trillion market.

The episode’s best minutes

Full analysis
  1. 20:05U.S. debt faces a tougher market as rate-sensitive buyers grow6 min
  2. 5:24The Fed’s forecasts make forward guidance less usefulPro pick 4 min
  3. 8:51A small Treasury operation could not bluff the bond marketPro pick 4 min
  4. One more moment in the full episode
Up next · Prof G MarketsSome pass-through tax breaks do little to boost investment5:18
“They said, $40 trillion is just overwhelming. It's just too big. So, you can't head fake this market.”
Benn Steilat 11:14 · The Real Eisman Playbook
11:14

Takeaways Pro pick

  1. The $6 billion operation was tiny relative to the Treasury market.
  2. Borrowing short-term to buy long-term debt repeats a strategy Bessent criticized.
  3. Japan sold about $88 billion in foreign securities during its intervention.

About this segment

Benn Steil explains why Bessent’s $6 billion Treasury swap was too small to move a $40 trillion market. He also recounts how Japan ultimately sold Treasuries to fund currency intervention.

Benn Steil

Benn Steil is a Director of International Economics at the Council on Foreign Relations.

Wrote award-winning histories of Bretton Woods and the Marshall Plan, and leads CFR’s Geo-Graphics economics blog.

From “Inflation, The Deficit & Why the Dollar Stays King with Benn Steil | The Real Eisman Playbook Ep 81”, Oct 26, 2026. Watch the full episode

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

  1. 8:54

    There's another guy with an unenviable portfolio. Yeah, unenviable position. We're going to come to the deficit and interest rates in a bit. But I just want to first focus on, Scott Bessent came out with this plan, which I think it's called Operation Twist, where he goes out and the Treasury Department sells short-term treasuries and buys long-term treasuries to the tune of $6 billion. Which is the sort of thing he criticized his...

  2. 9:27

    predecessor, Janet Yellen, for doing fiercely. Yes. Leave that aside. What I don't understand about it, and maybe you do, is the size of the federal deficit is $40 trillion. So, coming to coming... Going up $7 billion a day. Let's leave that aside. Let's just stick with $40 trillion, okay? That's a big issue. You got $40 trillion, and you're trying to lower long-term rates by buying $6 billion. What am I missing?

  3. 10:05

    Because it seems to me that's like bringing to a gun battle a butter knife. Completely agreed. But what Bassent would say, if he could talk to you away from the cameras, is, hey, look, I'm just making a shot across the bow. I want to show the markets that if they mess with me and that long-term rates get too high, I'm going to come out with heavy ammunition, and I'm going to hit them where it really hurts, when they least expect it.

  4. 10:36

    And it did not work. Not even close. Not even close. The first reaction from the market is, oh my gosh, what's up? And we did see a breach. It lasted a day. It lasted less than a day, right. But when the markets realized, hey, this is 0.016% of the- Is that what it is? Yes. I got to use that. It's nothing. It's 0.016% of the deficit. Percent. Percent of the treasury market. The treasury market. Right.

  5. 11:07

    So, this is nothing on its own. And when they calculated what sort of ammunition Besant could actually bring to the fight, They said, $40 trillion is just overwhelming. It's just too big. So, you can't head fake this market. And remember, Besant is not buying back long-dated treasuries with cash. No, he's issuing debt to buy debt. Exactly. So, he's got to borrow more short-term to buy back long-term.

  6. 11:44

    Again, exactly the sort of thing. Operation Twist. He criticized his predecessor for. I don't know if you remember the Japanese operation. He lent them money. So, what? But Besant was very concerned that the Japanese were intervening in the currency markets in order to push up the yen. And he did not want the Japanese to be selling treasuries in order to... So, instead of them selling treasuries, he lent them money to buy the yen.

  7. 12:16

    He told them to go to the Fed and use a certain Fed facility. And he declared victory because the operation did push up the yen. But, fascinating coda here, a month later, the Japanese released statistics on their foreign securities holdings. And what we learned was that the Japanese Ministry of Finance had intervened in the currency markets to the tune of about $99 billion. And they had sold $88 billion worth of foreign securities, almost all of that, presumably U.S. treasuries, in order to do it.

  8. 13:00

    So, Besant's logic did not work. The Japanese did, in the end, clearly sell treasuries in order to buy yen. Let's switch topics. We've only covered