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.

Whichever route he chooses — and he could also choose to do nothing and let the markets sort it out — Bessent could face credibility challenges from a market already growing skeptical and leery of the challenges Treasurys are facing.

Jefferies' chief U.S. economist, Thomas Simons, complained that the buyback announcement itself was improper. He pointed out that the move came two weeks after Treasury announced its quarterly refunding plans, during which it gave no indication that it was considering changing the buyback scheme.

"This breaks with Treasury's long-held strategy of making 'regular and predictable' announcements, and using the Refunding to announce almost all of their policy changes and guidance," Simons wrote. "We do not think it is hyperbole to say that this break in communication strategy reduces the overall credibility of their guidance."