'Bessent Put' takes hold: short squeeze in US swaps and options signals investors see a Treasury floor under markets

Traders are increasingly betting that the US Treasury under Secretary Scott Bessent will act to cushion market downturns, with a short squeeze rippling through US swaps and options markets in what Bloomberg characterised as the "'Bessent Put' at work" (Bloomberg). The term echoes the famous "Fed put": an investor belief that a powerful official will implicitly backstop asset prices, discouraging bets against US markets.

The squeeze matters because positioning in swaps and options sits beneath nearly every other dollar asset class. When shorts are forced to cover at scale, it compresses hedging costs, fuels further rallies and can detach prices from underlying fundamentals. A widely believed official "put" also changes behaviour at the margin — encouraging leverage and risk-taking on the assumption that downside outcomes will be softened by policy, a dynamic the Federal Reserve spent years trying to dispel after the 2008 crisis.

The backdrop makes the narrative credible enough to trade on. The Treasury has been expanding its bond-buyback programme in recent weeks, a move Yardeni Research's Edward Yardeni framed as masking a government that "is taxing too little and spending too much" (BBC). Billionaire investor Stanley Druckenmiller — Bessent's one-time mentor — publicly called the bond-buying strategy "a mistake" earlier on Tuesday (Bloomberg), highlighting elite unease about the Treasury's growing footprint in fixed-income markets even as retail and institutional flows lean into it.

Meanwhile the macro tape has been unusually kind to risk assets, reinforcing the sense of an official tailwind. Oil fell around 4% as investors shrugged off new US sanctions on Iran, easing inflation pressure (Reuters); Treasuries gained as the oil drop reduced pressure on inflation and gave Bessent room to manoeuvre (Bloomberg); and Bitcoin pushed above $80,000 on soft-dollar and debasement-driven momentum (Reuters) — a mix consistent with abundant liquidity expectations rather than tightening ones.

For the global financial system, the significance is twofold. First, if markets now price an implicit Treasury guarantee, the transmission of US fiscal policy into global asset prices strengthens — foreign central banks, sovereign funds and corporates all calibrate to the same signal. Second, it creates a moral-hazard trap: should equities or credit correct sharply despite the presumed "put", the credibility of both the Treasury and the broader US policy framework would be tested simultaneously, with emerging-market currencies already trading freer of Treasuries' traditional weight (Bloomberg). Watch whether Bessent publicly leans into or pushes back against the "put" framing — his words will move more than bond desks this week.

**Sources:** Google News, BBC