Skip to main content

The Treasury Wants Lower Rates But The Market Is Fighting Back

Adam Taggart | Thoughtful Money® Aug 29, 2026

Summary

The Treasury's bid to lower rates can't override the market — interest is also lender income, so investors demand yields that compensate for risk.

Yield-curve manipulation typically fails fast — the 1962–63 Operation Twist was arbitraged away, and the current attempt saw long rates snap back the next day.

A weaker dollar plus rising gold and crypto reads as a 'vote against the dollar' — and points to worsening near-term inflation and rate expectations.

For lower rates to stick, they must be backed by falling inflation expectations — not by Treasury attempts to engineer the yield curve, the guest argues.

Adam Taggart's takeaways

  • Top takeaway Frames the discussion around surging government interest expense crowding out other spending priorities, and notes the Treasury under Bessent has begun intervening directly in markets to push long-term rates down.
  • Identifies the new Treasury intervention as a so-called "Operation Twist" and points to Scott Bessent as the driving force behind it.

Scott Bessent's takeaways

  • Top takeaway Cited by the speakers as the Treasury Secretary behind the new "Operation Twist"-style intervention aimed at lowering long-term borrowing costs, which initially pushed long rates down before they rebounded the next day.

Dr. Art Laffer's takeaways

  • Top takeaway Compares the new Treasury move to Jim Tobin's 1962-63 Operation Twist — selling long debt and buying short debt to flatten the curve — and argues history shows arbitrage killed the original effort, so he doesn't think the Treasury should be involved.
  • Insists interest is also income to lenders, who must be assured of a real return or rates will rise, so any rate cut should come from lower expected inflation rather than Treasury market manipulation.
  • Says the Treasury is intervening simply because "the President wants lower interest rates" and "the Treasury works for the President," which he views as an inappropriate role for the institution.
  • Warns the policy isn't working versus roughly 1.5 months earlier: the dollar is weaker in FX, gold has flipped from falling to rising, cryptocurrencies are climbing, and spot commodity prices are firming — collectively a vote against the dollar.
  • Concludes that both the near-term inflation outlook and the near-term interest-rate outlook have worsened.