The effects of Treasury Secretary Scott Bessent’s extraordinary intervention in the bond market faded quickly on Thursday.
One day after Bessent announced that the Treasury Department would at least double its planned buybacks of longer-dated U.S. debt — a move aimed at adding liquidity to a “thin” summer market and tamping down rising government borrowing costs — bond investors essentially shrugged off the surprise, driving yields higher once again.
Yields have been rising on a combination of concerns, including elevated inflation, higher oil prices due to the war in Iran, a torrent of debt issuance from tech companies angling to lead the AI revolution, a U.S. budget deficit on pace to top $2 trillion for fiscal year 2026 and a national debt that just crossed $40 trillion.
After long bond yields rose to 19-year highs, Bessent on Wednesday announced the increase in repurchases, his latest effort to bring down long-term rates and have the Treasury lean more heavily on shorter-term borrowing.
The unusual move worked — but only briefly. After dropping on Wednesday, the yields on 10-year and 30-year Treasury bonds rose again today, though they edged off their intraday highs.
Bessent told CNBC Thursday morning that the Treasury Department’s debt buybacks could be even larger than the $4 billion he had announced, and he insisted that he has a “big toolkit” to drive yields lower. “We believe that the yields don’t reflect the underlying fundamentals,” Bessent said.
The potential for larger buybacks did little to calm bond market fears, as analysts and investors expressed skepticism that Treasury’s intervention will address the root of the concern.
“This is not the cure to what ails the bond market. There are structural forces here at play that are really beyond the Treasury and the administration’s control,” Adam Phillips, managing director of investments at EP Wealth Advisors, told CNBC. “You’re going to need to come at it with a little bit more force if it’s going to have staying power.”
John Fath, a managing partner at BTG Pactual Asset Management, told Bloomberg that the market might not be getting the message that Bessent wants. “They have reserved the right to increase the buyback, but I guess at some point, the markets might view that as desperation,” Fath said. “The bottom line is that deficits are not going away.”
Touting a new fiscal plan: In his interview with CNBC, Bessent tried to address the deficit issue, promising that a new plan to address fiscal concerns would be announced within days.
“We are announcing probably at the end of this week, beginning of next week an increased focus on fiscal consolidation,” Bessent said, adding that he, President Trump and budget director Russell Vought will be looking at both government expenses and revenues.
Part of that revenue picture, Bessent indicated, would be renewed tariff income as the administration refunds payments that the Supreme Court struck down as illegal and introduces new duties under different legal authorities. Bessent also said that a hit to federal revenue from immediate expensing of investments in new factories would ultimately grow the U.S. tax base.
Asked whether we’ve seen U.S. budget deficits peak under the current administration, Bessent said there’s a “very good chance we have.”
Bessent didn’t provide details about the forthcoming fiscal plan, but he insisted that Vought knows the ins and outs of the federal budget and where cuts can be made, including programs where money is being given to states and “is being frittered away.”
“I think it’s going to be a very exciting couple of weeks, couple of months as we put this together,” Bessent said.
The bottom line: Bloomberg called Bessent “the most interventionist Treasury secretary in financial markets in decades” after Wednesday’s buyback announcement, but it’s not yet clear whether the latest intervention will do much to combat a rise in borrowing costs — or how markets might perceive a more activist Treasury chief. At the same time, Bessent’s willingness to step into the market contrasts with a Fed that, under new chair Kevin Warsh, is trying to step back and have the markets rely less on central bank guidance.