What's in Besent's toolbox? In the morning, we talked about short-term returns, but in the medium term, we still believe that Besson's unique ability can suppress the upward trend of returns. After all, he himself claims to have a powerful toolbox, so it should not be underestimated. Can you please sort out what other ammunition is available for Besant? Bessent's recent statement also means that the Ministry of Finance is adopting a more proactive "bond issuance intervention" strategy. Traditionally, controlling the yield curve mainly relies on the Federal Reserve's monetary policy (such as QE or distortionary operations), but as the "chief bond salesperson of the country," Besant also holds multiple fiscal tools that directly or indirectly affect the supply, structure, and liquidity of the US bond market. According to the depth and direct impact on the market, please sort out: 1. Debt structure and issuance management (the most direct supply side leverage) The Ministry of Finance can directly change the supply of long duration bonds in the market by adjusting the "maturity combination" of bond issuance, thereby lowering the maturity premium. 1) Targeted reduction of the scale of long-term bond issuance. Reduce the issuance of long-term bonds with maturities of 10 and 30 years, and shift towards relying more on short-term bonds for financing. This will directly reduce the supply of long term bonds that are most lacking in buying demand in the market, alleviate the supply-demand imbalance of long term bonds, and promote a decline in long term yields. 2) Large scale US Treasury Bond Repurchase and 'Fiscal Version Distortion Operation' The Ministry of Finance has announced a doubling of the scale of a single long-term bond repurchase in the past two days and hinted last night that the repurchase scale will be even larger by repurchasing old bonds with poor liquidity in the secondary market. The current repurchase mainly involves purchasing old bonds with poor liquidity. The next step can be upgraded to a more systematic deadline replacement: Increase the repurchase frequency in the 10-20 year and 20-30 year intervals; Establish a quarterly minimum repurchase limit instead of making last-minute announcements; Using Bills or FRN financing to specifically repurchase long-term old bonds; Targeted operations in the period range of weak auction demand and deteriorating liquidity of old bonds; Coordinate the repo settlement date with the tax date, TGA fluctuation and the maturity date of large treasury bond. This is equivalent to the Ministry of Finance proactively shortening the average duration on the balance sheet. It is closer to the true 'Treasury version of distortion operation' than simply repurchasing old bonds. 2. Launch the "TGA Fund Investment Repo" program Currently, a large amount of fiscal cash is stored in the Federal Reserve's TGA. The Ministry of Finance expects TGA to be around $950 billion by the end of September, and may reach $1.05 trillion at one point in late October. The higher the TGA funds, the lower the reserve requirements of the banking system, and the greater the financing pressure on the repo market and primary traders. There are two specific ways: 1) Reduce or smooth TGA targets The Ministry of Finance temporarily issued less bonds and used the existing TGA cash to pay expenses, which is equivalent to reducing the recent net issuance of treasury bond, releasing TGA funds back to the banking system, increasing reserves, improving Repo liquidity and dealers' ability to accept treasury bond. But it's just a time exchange. TGA will need to be rebuilt sooner or later, and the issuance pressure will come back, so it can only be used to cope with temporary market pressure. The most likely measure to become the next new tool from a personal perspective 2) Put some excess TGA cash into overnight treasury bond Repo The Ministry of Finance lends the temporarily idle cash to the primary dealers or the central clearing Repo market, and the traders use treasury bond as collateral. The TBAC (Treasury Advisory Committee on Borrowing) has been formally discussing this mechanism since May. In August, primary traders provided feedback that the daily Repo investment volatility of $25-50 billion is generally manageable; If the design is reasonable, it can moderately ease financing constraints, expand intermediary balance sheets, and improve the market's ability to absorb new treasury bond 3. Cross departmental and international coordination tools 1) Further release the balance sheets of banks and primary traders The eSLR reform that came into effect in April has reduced capital penalties for large banks engaged in low-risk, low return intermediary business. Primary dealers reported to TBAC that this reform has improved the intermediary capacity of treasury bond and released more balance sheets for Repo. The next steps can also include: further adjusting the treatment of treasury bond and reserves in SLR; Revise the scoring method for GSIB additional capital; Expand Repo net settlement recognition; 2) Overseas central bank liquidity support and exchange rate intervention Allow foreign central banks (such as the Bank of Japan) to borrow US dollars directly using US bonds as collateral, avoiding selling US bonds in the open market to maintain their own exchange rates. Coordinated exchange rate intervention to stabilize the currencies of major debt holding countries and eliminate the hidden dangers of foreign capital selling US bonds. 4. Collaborate with the Federal Reserve 1) The distorted operation of the Federal Reserve and fiscal coordination The Ministry of Finance issues fewer long-term bonds and more short-term bonds; The Federal Reserve is targeted at buying long-term bonds and reducing its holdings of short-term bonds Equivalent to a significant decrease in net duration supply in the private market. 2) QE or yield curve control A more extreme tool is: The Federal Reserve has resumed large-scale purchases of long-term bonds; Set purchase limits for specific deadlines; Even announcing a 10-year or 30-year yield cap, known as Y CC. YCC has practical significance only in extreme cases such as severe recession or treasury bond market failure. Similarly, interest rate cuts themselves may not necessarily lower long-term bond yields. If the market believes that the interest rate cut is too early, it will push up inflation expectations and fiscal led risks again, and the result may be a short-term decline and a long-term rise, leading to a steepening of the yield curve. For current long-term issues, distorting operations are usually more precise than simply cutting interest rates. 5. Financial Rectification Last night, Bessen mentioned that the Joint Budget Management Bureau is promoting fiscal consolidation and reducing expenditures. This is the most important measure to cut off the flow of fiscal revenue and reduce expenditure. All issuance management, repurchase, and Repo tools, at most, redistribute risk between different maturities, holders, and time points. Only a credible medium-term fiscal plan can truly reduce the fiscal term premium. By providing a specific roadmap for deficit reduction, we can fundamentally lower the market's "default/excess premium" and guide long-term interest rates back to fundamentals. The first four are symptomatic, while the fifth is the root cause. Simply put Besant's "powerful toolbox" essentially replaces or supplements the Federal Reserve's traditional high-intensity monetary easing with the Treasury's proactive debt structure management, expected fiscal deficit constraints, and market liquidity buybacks. The core purpose of the combination punch is to suppress the momentum of soaring long-term bond yields without waiting for a significant interest rate cut by the Federal Reserve. Like last night's https://(x.com)/qinbafrank/status/2090435324765970902? S=46&t=k6rimWsEbo2D2tXolYcM-A talked about the rising yield: oil price, excessive issuance of treasury bond, and debt issuance of AI technology. The second and third points are structural, but Besant can do something about the second point. The first point is that oil prices affect Trump's decision.