Fed Holds Over 50% of 10-to-15-Year Treasuries; Operation Twist Could Further Monopolize the Market
Nashnova编辑部
The Fed already holds more than 50% of all 10-to-15-year U.S. Treasuries. Analyst Peter Tchir warns that a full-scale Operation Twist could lift the Fed's share of ultra-long bonds past 50% — approaching market monopoly and reshaping how long-term rates are set.
How much of this market does the Fed already own?
Bloomberg data shows the Fed holds over 50% of all Treasuries maturing in 10 to 15 years. Its share of overall long-term bonds is close to 20%.
This means → pricing in that maturity segment is no longer market-driven. The Fed's presence effectively *is* the market.
In plain terms = when the biggest buyer is also the biggest holder, the "market price" everyone else sees is really the price the Fed is willing to accept.
Is the Fed losing money on its own portfolio?
The Fed holds nearly $500 billion in coupon-bearing Treasuries maturing within a year, carrying an average coupon of roughly 2.9%.
The effective federal funds rate sits at 3.63% — the Fed's funding cost exceeds its coupon income, creating a persistent negative carry.
This reflects a reversal: the Fed used to remit profits to Congress; now it is adding to the fiscal deficit instead.
How would Operation Twist work — and what's the payoff?
Tchir's estimate: selling roughly $426 billion in short-dated coupon bonds and buying 20-year-plus Treasuries would pick up a coupon near 5.25%, well above the 3.63% funding cost — a significant positive spread.
Operation Twist — swapping short-term bonds for long-term ones without changing total holdings — is technically not QE because it involves no money creation.
This means → the Fed could materially push down long-end yields while claiming it is not printing money.
Where is the "monopoly" line?
Swapping only short-dated coupons would lift the Fed's share of 20-year-plus Treasuries past 15%, and above 20% of the free float (excluding what the Fed already holds).
If 1-to-3-year maturities were also included, the Fed's share of ultra-long bonds would breach 50%.
In plain terms = when one holder owns more than half the supply, every other buyer and seller is effectively a price-taker. Tchir says that crosses the line into monopoly territory.
The Treasury has already moved — how did markets react?
Treasury Secretary Bessent raised the per-operation buyback size for long-term bonds to "at least $4 billion," aiming to press long-end yields lower.
The market response was brief: gold rose, the dollar weakened — partly read as a "currency debasement" trade.
Tchir sees that reaction as potentially overdone — buybacks restructure debt, they do not create money. Outstanding T-bills stand at $7.5 trillion; coupon-bearing bonds at $21.7 trillion.
What should markets watch next?
Tchir's view: Treasury buybacks alone lack the scale to durably suppress long-end yields. The decisive variable is whether the Fed steps in.
This means → over the coming days, the market will be watching whether Bessent can secure the Fed's policy cooperation — that is the pivotal signal for the direction of long-term rates.
In plain terms = the Treasury's hand isn't big enough on its own; the question is whether the Fed is willing to sit down at the same table and play.
Content is for reference only, not financial advice.