The Treasury Department announced on Aug. 19 that it would double the size of its long-dated bond buybacks, from $2 billion to at least $4 billion per operation, aimed at the 10- to 30-year sector and running from Sept. 9 through Nov. 4. The announcement came after the 30-year yield touched a 19-year high. Yields fell within minutes. By the next afternoon they had round-tripped to levels above where they started.

The market’s verdict was swift: This wasn’t liquidity management, it was price management—and a mistake far larger than $4 billion suggests. Treasury’s announcement gave the game away. It justified the larger operations as liquidity support in sectors with “consistent strong sponsorship from market participants,” but strong sponsorship is the definition of a healthy, working market. There were no failed auctions, no dealer balance-sheet seizure, no forced unwinds, nothing resembling Treasurys in March 2020 or U.K. gilts in September 2022.

Volatility was contained, and trading was orderly—not a malfunction but the machine doing its job. Consider what the machine was pricing. Inflation is 3% to 4% and has been above the Fed’s target since 2021. Unemployment is 4.1%, full employment by any definition. The deficit is running near 6% of gross domestic product, a number America has never before produced in peacetime at full employment. The national debt crossed $40 trillion the same week Treasury intervened.

Net interest will exceed $1.1 trillion this fiscal year, more than the defense budget. The 10-year yield, even after the summer selloff, sits at or below the economy’s nominal growth rate. That means a borrower (federal government) running 6% deficits at full employment, with above-target inflation, still funds itself at roughly the rate its economy grows.