Scott Bessent Just Changed the Liquidity Setup | Macro Mondays: August 24, 2026

Scott Bessent's decision to double the buybacks of longer-running US Treasury bonds to $4 billion has sparked significant discussion, although the immediate liquidity impact was initially viewed as minimal. This move comes amid a narrative of dollar debasement that often intensifies during rallies in gold and Bitcoin, suggesting a potential shift in market sentiment.

Miguel highlights that the UK is not the primary buyer of Treasuries, with hedge funds emerging as the marginal buyers of this debt. He underscores the critical role of the repo market's smooth functioning for risk-taking and leveraging by these hedge funds. While the Treasury's buyback program could enhance liquidity and market functioning, the sustainability of these liquidity additions hinges on the Treasury's strategy regarding the Treasury General Account (TGA) level.

There is speculation that a permanent reduction in the TGA level could lead to lasting liquidity impacts on the markets. The Treasury has the ability to significantly ramp up the buyback pace, potentially funding it for years, and there is a possibility of front-loading buybacks in anticipation of the upcoming election.

The economic cycle is projected to extend through 2027, while the ongoing conflict in Iran is beginning to cost the U.S. both political and geopolitical capital. The upcoming summit with Xi Jinping is expected to focus on the Homo Strait rather than trade issues, with China playing a pivotal role in balancing energy markets through its oil imports. The rising price of oil is largely attributed to increased buying by China, illustrating the interconnectedness of global markets.

The Jackson Hole symposium is anticipated to delve into the implications of financial innovation for payments and policy. A disconnect has been noted between inflation expectations and the statements of Fed officials regarding potential rate hikes. Kevin Warsh may have an opportunity to address the impact of productivity and technology on prices at the symposium, which could signal forthcoming changes in economic policy.