Treasury Secretary Scott Bessent's recent intervention to stabilize the U.S. bond market, which included doubling debt buybacks to at least $4 billion, has been met with skepticism and limited success. Despite his efforts, long-term Treasury yields have climbed back up, with the 10-year benchmark closing near 4.73%, close to its highest point since he took office. This "Treasury twist," aimed at rejiggering yields, only provided a temporary dip on Wednesday before yields rose again.
Several factors are contributing to the persistent rise in yields, which appear to be beyond Bessent's control. These include record U.S. national debt surpassing $40 trillion, a surge in corporate bond issuance driven by the artificial intelligence boom, and inflation concerns exacerbated by President Donald Trump's war with Iran. Confusion surrounding Federal Reserve Chairman Kevin Warsh's strategy also adds to investor apprehension. Analysts like Matt King of Satori Insights suggest that lasting relief for long-term yields would require a smaller U.S. budget deficit, a stock market decline, or reduced AI investment, all scenarios the administration wishes to avoid.
Bessent believes investors are acting on "bad information" and has emphasized that the current competition for capital, partly due to AI investments, will eventually lead to faster and non-inflationary economic growth. However, experts like Rebecca Patterson of the Council on Foreign Relations argue that buybacks are "more signal than substance" and that a more effective and sustainable policy would involve Fed quantitative easing. While Bessent's actions have prompted debate about a "Bessent put," echoing former Fed Chair Alan Greenspan's market interventions, many doubt he has the firepower to significantly influence bond yields.
