Peter Tchir, head of macro strategy at Academy Securities, has publicly stated that the Federal Reserve, under Chairman Kevin Warsh, needs to launch "Operation Twist." Tchir's comments come in response to the U.S. Treasury Department's recent announcement to increase its planned purchases of outstanding 10-year to 30-year debt, a move he described as "kind of mediocre."
Tchir advocates for the Federal Reserve to actively discuss cutting interest rates and explicitly remove future rate hikes as a possibility. He implies that the Treasury's current measures are not robust enough to effectively manage the yield curve or address broader financial conditions.
The context for Tchir's recommendation is the Treasury's effort to influence long-term bond yields, with the department stating it would "at least" double buybacks of bonds maturing from 10 to 30 years. This action, spearheaded by Treasury Secretary Scott Bessent, aims to nudge the market, which saw 30-year yields drop by as much as 10 basis points to 5.18% and 10-year yields drop 5 basis points to 4.66% immediately following the announcement, although these declines later pared.
Deutsche Bank strategists, including George Saravelos, also drew parallels between the Treasury's buybacks and the Fed's "Operation Twist" playbook, describing it as a "soft form of financial repression." However, Evercore economists Krishna Guha and Marco Casiraghi viewed the Treasury's move as a "very small-scale Operation Twist" with limited firepower, warning it might even backfire if it fails to produce a sustained impact. They argued that the operation changes almost nothing fundamental. Tchir's call for the Fed to act suggests he shares the view that the Treasury's current actions are insufficient.
