Treasury Secretary Scott Bessent Struggles to Curb Surging Bond Yields
Treasury Secretary Scott Bessent expanded bond buybacks to lower government borrowing costs as 10-year Treasury yields hit a 19-year high above 5%.
U.S. Treasury Secretary Scott Bessent has implemented a series of aggressive market interventions to combat surging government borrowing costs. In mid-August, Bessent expanded a buyback scheme for long-dated Treasury bonds, executing a repurchase of over $5 billion in 10-year and 20-year notes on September 10. Despite these efforts, 10-year Treasury yields climbed above 5% for the first time since 2007, contradicting Bessent's goal of keeping rates below 4%.
These interventions occur amid a global fiscal crisis and domestic volatility driven by the policies of President Donald Trump, including a global trade war and military conflict with Iran. These factors, alongside rising energy prices and high deficits from the 2025 tax-and-spending law, have fueled stubborn inflation. In response, Federal Reserve Chairman Kevin Warsh raised the benchmark interest rate to a range of 3.75% to 4% on September 16, the first hike since 2023, despite demands for rate cuts from the White House.
Bessent has utilized various tools to stabilize markets, including the Exchange Stabilization Fund in July to buy Japanese yen and prevent Japan from selling U.S. Treasurys. While Bessent characterizes the bond buybacks as liquidity management and claims to possess asymmetric information, critics argue the strategy signals weakness and fails to address fundamental fiscal deficits. Some analysts suggest the interventions align with an industrial policy to lower borrowing costs for AI infrastructure, while others warn they undermine investor confidence in the U.S. dollar.
