US Treasury secretary Scott Bessent is taking on increasingly sceptical bond investors as Washington attempts to contain rising borrowing costs in the $32tn Treasury market without addressing the deeper fiscal pressures driving yields higher, according to a report by then Financial Times.
The Treasury on Wednesday announced plans to at least double its purchases of longer-dated government bonds from next month, a move that initially triggered a sharp rally in 10- and 30-year Treasuries.
The gains proved short-lived, however, with yields reversing higher even after Bessent appeared on CNBC a day later to highlight the range of measures available to the administration.
The episode underscores the challenge facing Bessent as investors demand evidence that Washington can bring down its deficits, stabilise inflation and manage a rapidly expanding debt load.
The former hedge fund manager has adopted a notably interventionist approach since becoming Treasury secretary, taking positions on currencies, commodities and government debt that differ from the more conventional playbook of his predecessors.
His latest challenge is the so-called bond vigilantes — investors increasingly demanding higher compensation for holding US government debt amid concerns over fiscal deterioration, persistent inflation and heavy borrowing by technology companies to fund artificial intelligence infrastructure.
Charlie McElligott of Nomura described the Treasury’s latest buying programme as a “band-aid on a bullet hole”, arguing that the measures alone would not be enough to overcome market forces.
From 9 September, the Treasury plans to increase its regular purchases of Treasuries with maturities of between 10 and 30 years from around $2bn to at least $4bn.
The programme was initially introduced primarily to improve liquidity and support trading in older government securities. Its expansion represents a significant increase in the Treasury’s presence in the longer end of the market.
Long-term Treasury yields initially fell following the announcement, but the rally rapidly lost momentum.
Bessent has argued that current Treasury yields do not accurately reflect underlying economic fundamentals, pointing to the impact of the Iran conflict and poor liquidity in the 30-year market.
He has also indicated that the administration plans to unveil measures aimed at strengthening fiscal discipline, potentially as soon as the end of this week or early next week.
Bessent has suggested that the US may already have reached the peak of its government deficits.
The numbers remain challenging. The Congressional Budget Office expects the federal budget deficit to equal roughly 5.8% of GDP this year, broadly unchanged from 2025 and substantially above Bessent’s stated objective of bringing the deficit down to 3% by 2028.
For some investors, Treasury action alone is unlikely to provide a lasting solution, while others see the Treasury’s intervention differently, arguing that its purpose is not necessarily to reverse the upward trend in yields but to prevent market conditions from becoming disorderly.
With the US carrying a debt burden approaching $40tn and investors increasingly focused on fiscal sustainability, the Treasury secretary is facing a market that may require considerably more than tactical intervention.
