US Treasury Secretary Scott Bessent has moved to calm a bond sell-off by doubling the pace of long-dated debt buybacks, after 30-year yields climbed to levels last seen before the 2008 financial crisis. The intervention, paired with a similar move to support the yen, points to growing unease in Washington over the country's fiscal trajectory rather than confidence in it.
Bessent's decision to step into government bond markets to fight rising yields sits awkwardly with his calm tone on television. Days earlier, he told CNBC: "there's nothing magic about that $40tn number" — remarks made as the country's debt mountain surpassed another record.
Treasury doubles down on bond buybacks
Earlier this month the Treasury also intervened to prop up the Japanese yen by selling euros rather than dollars, a move widely read as a sign of weakness given Japan's position as a major holder of US treasuries. Washington also let Japan tap a facility allowing it to borrow against its treasury holdings without selling them, a step seen as another marker of concern.
Last week Bessent went further, promising to double the rate at which the Treasury buys up the longest-dated bonds to push yields lower. Even so, 30-year yields were rising again by Friday afternoon while the dollar slid, a pairing more often associated with emerging economies.
Inflation fears and an AI debt wall
Several forces are feeding the sell-off. The Iran conflict is keeping oil prices elevated, and investors are watching new Federal Reserve chair Kevin Warsh's approach to interest rates, fueling worries about future inflation eroding the value of fixed treasury payments.
A separate pressure comes from the AI investment boom. Hyperscaler companies have issued $219bn (£160.5bn) in corporate debt so far this year to fund datacentre buildouts, according to JP Morgan analysis, giving investors an alternative to treasuries.
Debt on an unsustainable path
Underlying both pressures is doubt about US creditworthiness. Without policy change, the Congressional Budget Office expects government debt to rise from 100% of GDP today to 175% within 30 years.
Bessent appeared to signal a willingness to step in again if 30-year yields are pushed too far above 5%. Warsh addresses the Jackson Hole central bankers' conference this week, with the risks of a self-inflicted bond market crisis continuing to grow.
Source: The Guardian
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