What happened:
▶️ In 2016, 10-year yields plunged to historic lows of 1.36%-1.5%
▶️ In 2020–2021, the Fed fired up the printing press to counter the economic fallout of the pandemic, creating nearly $5 trillion out of thin air
▶️ In 2022–2023, the Fed hiked interest rates from 0% to over 5% to combat inflation
▶️ The nominal price of long-term Treasuries collapsed on the secondary market as newly issued yields surged, leaving coupon payments incapable of offsetting the capital losses
As a result, while the rolling 10-year return on Treasuries had averaged 5.41% since 1793, by August 2026 it dropped to -1.85%. It is easy to see why the Treasury feels compelled to step into the bond market immediately, rolling out "diet QE" tomorrow by doubling its Treasury buyback program.
What’s next:
If Bessent’s plan succeeds and yields decline, equities and crypto will gain fresh fuel to rally, convinced that the Treasury is ready to extinguish the fire with pure liquidity.
If the Treasury's plan falters, the reverse will unfold, opening up prime discount-buying opportunities. In that scenario, the US would be left with only one viable playbook: financial repression. Rates would be artificially pinned below inflation so the national debt can be inflated away through dollar devaluation.
Markets would be flooded with virtually limitless liquidity, but nominal asset gains would be eroded by that very currency depreciation. In the end, the only investors walking away with real wealth will be those whose assets can outpace inflation.