Treasury Trumps Fed in Bond Yield Control, Jefferies Strategist Warns

Jefferies strategist Christopher Wood has made a significant argument that the US Treasury has surpassed the Federal Reserve in controlling long-term interest rates. Wood believes that the Treasury's actions, particularly those of Secretary Scott Bessent, have become more crucial than the Fed's signals in setting the direction of long-term yields.

According to Wood, Bessent's willingness to increase long-end bond buybacks and potential use of funds from the General Account to support the market amount to a form of 'Treasury QE.' While these steps are not formal quantitative easing by the central bank, they share similarities with it and aim to prevent long-term yields from rising too far.

Wood sees this approach as fundamentally inflationary in the sense of dollar debasement. He argues that holding down yields through policy intervention rather than market clearing weakens the case for holding long-term US Treasuries, which he believes remain in a structural bear market.