Treasury Secretary Scott Bessent's recent move to increase bond buybacks has been met with mixed reactions, with some investors feeling it didn't go far enough. The Treasury Department announced it would repurchase a maximum of $6 billion in longer-term bonds during its Thursday operation, specifically targeting 10-year to 20-year Treasurys. This amount, while triple the previous maximum of $2 billion per operation, was less than what some investors had hoped for, especially given Bessent's earlier statements suggesting a significant expansion of the program.
Bessent had previously stated that doubling buybacks to $4 billion was the minimum to expect, which set high expectations among market participants. The announcement on Wednesday, therefore, left some investors "wanting more," as noted by Leah Traub, leading to an immediate market reaction. Following the announcement, Treasury yields, which move inversely to bond prices, climbed, with the 10-year yield surging to over 4.85%, its highest level since November 2023. The 20- and 30-year bond yields also rose to as high as 5.3%.
This market response suggests that Bessent's attempt to "cool market fever" and push down yields backfired, at least initially. Analysts like Peter Boockvar, chief investment officer at One Point BFG Wealth, echoed concerns from legendary investor Stanley Druckenmiller, who warned that if markets believe the Treasury is defending a price, every rise in yields becomes a test of official resolve. Many investors and economists believe the underlying fundamentals, such as the U.S. national debt surpassing $40 trillion, warrant higher yields, making Bessent's efforts a potential trap for the Treasury Department.
Despite the immediate market reaction, Bessent has taken a strong stance, famously telling currency traders, "I'm the house now." He views the rising yields as a "fever" fueled by the financial press and aims to return markets to a "fact-based" equilibrium. However, this aggressive approach has rattled some investors and raised concerns about the credibility of Treasurys as an asset class, according to BMO Capital Markets analyst Ian Lyngen.
