US 30-year Treasury yields surged as high as 5.286% during the session on September 1, returning to near the level seen before Treasury Secretary Scott Bessent's intervention in the bond market last month. This rebound erased the temporary gains from Bessent's plan to repurchase government debt and indicates that the effect of his intervention was short-lived. The renewed increase in the 30-year yield suggests that pressure is mounting again on long-term US funding costs.
The global bond market experienced a significant sell-off, contributing to the rise in US yields. This sell-off was fueled by inflation concerns, largely due to rising oil prices, and investors' increased expectations that the Federal Reserve will raise interest rates. The US 30-year bond entered September on its worst stretch since 2006, highlighting the broader market anxieties.
Bessent's strategy, dubbed a "Treasury twist," involved buying long-dated bonds to lower long-term yields while selling shorter-term debt. The Treasury Department had announced on August 19 it would at least double its purchases of 10- to 30-year Treasuries to a minimum of $4 billion per operation, up from a previous cap of $2 billion, with the new program set to begin on September 9. However, the temporary pullback in yields that followed the announcement quickly reversed, with the 30-year yield marching back towards the 5.27% level shortly thereafter. Critics, like Bessent's mentor Stanley Druckenmiller, argued that such liquidity tools could only postpone, not solve, solvency conversations.
