Treasury Secretary Scott Bessent's efforts to curb rising US government bond yields faltered as his $6 billion buyback intervention led to an increase in yields, not a decrease. The Treasury announced it would repurchase $6 billion in US government debt, an expansion of its program, but this figure was lower than the $8 billion to $10 billion estimates circulated by Wall Street analysts, leading to disappointment among traders. This intervention has repeatedly faced criticism from Wall Street, with investors warning it could undermine the agency’s credibility and work against the Federal Reserve’s efforts to combat inflation.
Following the announcement, Treasury yields rose, with the benchmark 10-year note climbing 0.05 percentage points to just below 4.86%, reaching its highest level since late 2023. This increase in borrowing costs is expected to pressure President Donald Trump’s administration ahead of midterm elections, where inflation, a prolonged war in Iran, and trade disputes with Canada are key concerns for voters. Analysts believe that for the Treasury to truly impact yields, a significantly larger buyback, perhaps $10 billion or more per operation, would be needed.
Investors were largely unimpressed by the $6 billion figure, which was an increase from a previous $2 billion maximum but still deemed insufficient given the vast size of the US Treasury market, estimated at $32 trillion. Scott Bessent had previously stated he intended to calm what he called a market “fever” by targeting what he believed was an overreaction by the financial press. However, the market reaction suggests that attempts to intervene in such a large market with comparatively small buybacks can be counterproductive, potentially adding upward pressure on interest rates.
The failed intervention also followed Bessent’s warning to traders not to bet against the yen, where he asserted having “asymmetric information” regarding the Bank of Japan’s actions. However, his attempt to manage market sentiment domestically regarding bond yields has been met with skepticism and a negative market response, with the Nasdaq Composite and S&P 500 experiencing declines on the day of the announcement. This underscores the challenges faced by the Trump administration in influencing key economic indicators like bond yields.
