Treasury Secretary Scott Bessent has repeatedly warned investors against betting on rising US Treasury yields, stating he is "on the other side of the trade" and possesses "valuable information." However, traders appear to be largely ignoring these warnings, with a recent Bloomberg article describing their reaction as "Markets Shrug" and an opinion piece calling Bessent's efforts a "buyback gimmick." He has also challenged traders on other fronts, including bidding up oil prices and pushing down the Japanese yen.
Bessent's strategy includes an expanded bond buyback program. The Treasury Department announced three weeks ago that it would increase buybacks of longer-term US government bonds "by at least double" as a form of "liquidity support." This was followed by an announcement that the Treasury would buy back $6 billion of 10- to 20-year bonds on Thursday. Despite these measures, benchmark 10-year Treasury yields reached their highest levels since 2023 on Wednesday, suggesting that the market was not convinced by the buyback's effectiveness.
Traders deduced that the increased buybacks were designed to keep a lid on US bond yields. However, this move was perceived as a "gimmick" by some, and the bond market has not reacted as Bessent intended. His public declarations, including stating "I am the house now" in reference to his efforts to steer the yen and yields, have been met with skepticism and even defiance from traders who continue to test his resolve. The US also sold $39 billion in 10-year notes at a 4.834% yield, with the strongest demand seen since 2019, further indicating market resistance to Bessent's influence.
