Good evening. The bond market today shrugged off the Treasury Department's attempt to rein in rising borrowing costs, as investors dismissed a move by Treasury Secretary Scott Bessent as just a Band-Aid on a much bigger problem. We've got details, plus a look at some scary new projections on healthcare costs.
Bessent Promises a New Fiscal Plan as His Bond Market Intervention Fizzles
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.
Employers Expect Healthcare Costs to Rise 11.1% in 2027: Survey
U.S. employers expect to see their healthcare costs rise by 11.1% next year, according to a survey by WTW, a global advisory firm. If that estimate pans out, it will be the largest annual increase in healthcare costs in more than 20 years, The Wall Street Journal said Thursday.
Employers have faced rising healthcare costs for years, and the pace of the increase has been accelerating. A WTW official told the Journal that the rise in costs is becoming "utterly unsustainable."
Workers will almost certainly feel the pinch as employers look to pass on some portion of their cost increases. In 2026, employees covered by workplace insurance are expected to spend $5,297 on average on healthcare, including premiums, copays and deductibles, according to the consulting firm Aon. That's a $388 increase from 2025, or roughly 8%, and the increase next year could be larger.
The factors driving costs higher include expensive cancer treatments and the widespread use of weight-loss drugs.
The bottom line: Healthcare costs continue to rise, with no end in sight. Brace for another major increase next year.
Number of the Day: $19.9 Billion
President Trump is reportedly spending much of his time on some $900 million worth of construction projects in Washington, D.C., including a ballroom complex and the troubled renovation of the Lincoln Memorial Reflecting Pool. Last month, he added another project to his agenda when he announced a plan to remake Dulles International Airport, the primary airport serving Washington.
"It's time to ensure that the United States has the greatest airports anywhere in the world, and we're starting right here with the capital city," Trump told reporters at the White House. "Whether you're a Republican or Democrat, you don't want to go and be subjected to this airport because this airport is a terrible place to be."
On Thursday, the Metropolitan Washington Airports Authority voted to provide $15.5 billion to help fund the project. MWAA had previously approved $4.4 billion for the project, bringing the total cost to about $19.9 billion.
Trump was reportedly deeply involved in the design process, reviewing more than 30 proposals before selecting the winning bid, which includes the construction of new underground tunnels, at a cost of $3.75 billion. The design also includes large windows and gold accents throughout the airport, something of a Trump signature that can be seen throughout his heavily retouched White House.
Janet Bednarek, an airport historian, told The Washington Post that Trump's intense involvement in the details of the Dulles project is unusual, at least as far as presidents are concerned. The total cost of the project is also exceptional. By way of comparison, the recently completed redevelopment of LaGuardia Airport in New York City cost about $8 billion.
Reflecting on the nearly $20 billion cost of Trump's Dulles project, Bednarek remarked, "That's just a phenomenal amount of money."
Chart of the Day: What Trump Talks About
From Violet Jira at NOTUS:
Fiscal News Roundup
- Treasury Turns to Interventionist Tactics to Lower Interest Rates – New York Times
- Bessent Flags Bigger Debt Buyback Potential, Coming Fiscal Plan – Bloomberg
- Bessent Says Treasury Might Push Bond Buybacks Well Past $4 Billion Per Issue – Quartz
- Treasury Yields Rebound, Wiping Out the Decline Following Bessent's Intervention – CNBC
- Dow Tumbles 700 Points, S&P 500 Falls as Treasury Plan to Subdue Yields Fails – CNBC
- JPMorgan Team Sees Credibility Risk in Treasury's Buybacks – Bloomberg
- James Braid to Depart White House – Politico
- US Workers Are Paying More for Healthcare, and Next Year Will Be Worse – Wall Street Journal
- Trump's FAA Picked an Unlikely Contractor to Lead Its Air Traffic Overhaul. The Agency Is Having Second Thoughts – Politico
- A Quiet Channel Between Ice and Iran Shaped Deportation Flights, Newly Released Emails Show – Associated Press
- States Pour Taxpayer Dollars Into College Sports as Athlete Pay, Soaring Costs Squeeze Budgets – Associated Press
- Under Trump, Protected Wild Horses Are Going to Slaughter – New York Times
- What's Happening at Big Bend? The Fight to Protect One of America's Last Wild Places – CBS News
Views and Analysis
- What's Behind the Bond Market Roller Coaster? – Washington Post
- The Treasury Market's Coveted Status as a Safe Haven Is Fading – Wall Street Journal
- Scott Bessent and the Art of the Treasury Tightrope – Wall Street Journal
- How the AI Borrowing Binge Helps Drive Up Government Bond Yields – New York Times
- Bessent Becomes Most Interventionist Treasury Chief in Decades – Bloomberg
- Bessent's Bond Interventions Won't Fix the Real Problem: Too Much Debt – Forbes
- Did Bessent Put the Fed in a Bind? – New York Times
- Bessent Leans Into His Role as America's Bond Trader in Chief – Wall Street Journal
- Bond Yields Are Still Relatively Low – Reuters Breakingviews
- As the US National Debt Reaches $40 Trillion, Trump Has Some Explaining to Do – MS NOW
- $40 Trillion Debt, Oh My! – Center for Economic and Policy Research
- America Is About to Get More Expensive – New York Times
- The Best Way Toward a Social Security Fix? This One Is Tried and True – Washington Post
- Americans Are Getting Caught in the Safety Net – Wall Street Journal
- Ro Khanna Gets a Wealth Tax Education – Wall Street Journal
- Trump Has a New Plan to Crush Iran's Economy. But Will He Stay the Course? – CNN
- Moderna's Road to a Cancer Vaccine – Wall Street Journal