Treasury Secretary Scott Bessent's plan to reduce US borrowing costs by increasing bond buybacks has shown some initial impact on the market. Since his announcement, Treasuries have outperformed equivalent-maturity swaps, narrowing the 30-year spread to its smallest since February, and benchmark US yields have generally drifted lower after an initial fluctuation. This has led some analysts, like Jason Williams of Citi, to suggest a "Bessent put" is at work, providing a potential backstop for the long end of the market.
However, the effectiveness and sustainability of these measures are debated. While the Treasury's move to potentially use its General Account at the Federal Reserve to finance increased purchases and a drop in crude oil prices provided a further boost, long-term borrowing costs remain near multi-year highs. The 10-year US yield is around 4.7%, and the 30-year Treasury yield is near 5.2%, close to their highest levels since 2007. Despite the intervention, critics like Libby Cantrill of Pimco argue that the fundamental reason for higher yields—the elevated US budget deficit requiring significant Treasury supply—remains unchanged.
Market sentiment reflects this mixed outlook. After Bessent's initial announcement to double buybacks to at least $4 billion per operation, yields initially dropped but quickly rebounded. This indicates that while the buybacks provide a technical fix, they may not address the underlying concerns about the expanding government debt, which has crossed $40 trillion, and annual interest payments approaching $1.2 trillion. The market's reaction suggests that a technical fix alone does not resolve the broader fiscal challenges.
