Treasury Secretary Scott Bessent's recent plan to mitigate US borrowing costs by expanding bond buybacks has sparked considerable debate about its effectiveness. Although initial market metrics and positioning, such as the narrowing of the 30-year spread between Treasuries and equivalent-maturity swaps to its smallest since February, suggested an immediate impact, the broader effect on long-term yields appears to be limited. Benchmark US yields did initially drift lower, and there was a bullish tilt in the options market for long-maturity Treasuries. However, many analysts, like Jason Williams of Citi, view these actions as providing only a "potential light backstop," with a focus on doing "whatever it takes" to achieve goals, including yen intervention.
Despite Bessent's intervention, which involved increasing planned purchases of 10 to 30-year Treasuries from $2 billion to at least $4 billion per operation, the rally proved short-lived. Less than two weeks later, the 30-year yield climbed back above 5.28%, essentially erasing the gains from his intervention and returning to levels seen before the announcement. This reversal has led to skepticism, with critics like Dan Morehead of Pantera Capital suggesting the intervention backfired by revealing the Treasury's discomfort with certain yield levels. The 10-year US yield has also risen to roughly 4.8%, its highest since January 2025, and the two-year yield is approaching 4.4%.
Experts highlight that fundamental reasons driving higher Treasury yields, such as persistent structural US budget deficits requiring significant bond supply, remain unchanged. Libby Cantrill of Pimco notes that while buybacks might temporarily decrease yields, they don't address these underlying issues. The market's inability to sustain lower rates indicates investors are still demanding greater compensation for holding long-dated debt. This situation suggests that even with the "Bessent put" in play, long-term borrowing costs continue to be influenced more by broader economic conditions, inflation risks, and enormous borrowing requirements, rather than solely by direct government intervention. Treasury yields are expected to remain elevated, with some forecasts suggesting the 10-year yield could reach 5%.
