Treasury Secretary Scott Bessent's attempts to control long-term borrowing costs have not yet been effective, as interest rates rebounded on Thursday. The yield on the 10-year Treasury note, a key benchmark for mortgage rates, rose back to 4.69%. This increase occurred despite Bessent's announcement that the Treasury would double its bond buyback program to $4 billion per operation from $2 billion, starting next month. The buybacks are intended to decrease the supply of 10-year to 30-year bonds and subsequently increase their prices, thereby lowering yields.
Market participants were initially surprised on August 19 when the Treasury indicated it would at least double the size of its buyback operations. Bessent clarified that his strategy is aimed at quelling a "fever" in the bond market and pushing things back towards equilibrium. He also stated on CNBC that the bond repurchase program could potentially exceed $4 billion, emphasizing the Treasury's extensive toolkit.
However, Wall Street investors remain concerned about several factors contributing to the upward pressure on yields. These include the burgeoning government debt, significant borrowing by technology firms, and the Federal Reserve's commitment to combating inflation. The upcoming announcement of the exact size of the next day's operation to repurchase 10-year to 20-year securities is highly anticipated by dealers.
