Scott Bessent, the US Treasury Secretary, is being watched as one of the most interventionist Treasury chiefs in decades after pushing multiple measures to curb the rise in long-term US borrowing costs, from increasing buybacks of long-term bonds to intervening in the yen market with Japan. Most recently on Wednesday, the US Treasury announced it would at least double the buyback size for 10- to 30-year government bonds to help address pressure in the long-term bond market. Earlier, on July 31, Bessent oversaw the first official US purchase of yen in three decades, seen as helping reduce the need for Japan to sell its holdings of US government bonds to fund yen intervention. Mark Sobel, a former US Treasury official now at OMFIF, said Bessent clearly takes an activist approach in markets, reflecting his background in the hedge fund industry, and sees the key motivation as the government's concern over rising long-term bond yields. That concern has grown after the 10-year US Treasury yield, which Bessent has used as one of his key indicators, rose above the level before Donald Trump returned to the White House. The recent bond selling has not come from a sudden crisis but has built up from worries about inflation, the Federal Reserve's policy direction, and high budget deficits, keeping mortgage rates elevated and pressuring economic growth ahead of the November midterm elections. Bessent's approach also raises questions about the Treasury's traditional principle of conducting debt issuance in a steady and predictable way to avoid surprising markets. Gregory Faranello, head of US rates strategy and trading at AmeriVet Securities, said the announcement of larger bond buybacks runs counter to that principle, and the message the government is sending to markets is fairly clear: it wants to stop the rise in bond yields. The issue is even more notable because Bessent was previously one of the critics of former Treasury Secretary Janet Yellen's approach after the US government in 2023 adjusted debt issuance to help ease pressure on yields, with some Republicans at the time viewing it as a policy to help stimulate the economy before the election. However, a number of economists and investors question how sustainably market intervention can hold down borrowing costs, since the fundamental factors driving bond yields higher remain unresolved. With about two months left in fiscal 2026, the US has already accumulated a budget deficit of 1.8 trillion dollars, up 5 percent from a year earlier, with spending driven by Social Security, Medicare, Medicaid, and interest on the public debt, while defense spending is likely to rise and Republicans are considering further tax cuts. Robin Brooks, a senior fellow at the Brookings Institution, said that instead of fixing the underlying problem by reducing debt and controlling the budget deficit, the government is choosing an approach that looks like an attempt to manage the yield curve. Bessent's latest measures moved markets immediately, with the 10-year US Treasury yield falling about 6 basis points in afternoon trading in New York, while the 30-year yield fell almost 9 basis points. However, Guy Miller, chief strategist at Zurich Insurance, warned that this kind of intervention may have the power to move markets for a while but cannot continue indefinitely if the government does not address the fiscal policy problems that are the root cause. Meanwhile, Peter Boockvar, chief investment officer at Onepoint Bfg, concluded that Bessent is opening a fight on two enormous markets at once: the US government bond market and the foreign exchange market, which is a very challenging game.
Treasury buybacks and yen intervention aim to curb long-term yields, but the article notes yields rose above pre-Trump levels due to inflation and deficit worries, indicating upward pressure on yields.
