U.S. Treasury Secretary Scott Bessent announced an expansion of the Treasury's longer-dated bond repurchase program to at least $4 billion, up from about $2 billion, in an effort to ease surging long-term yields, a move that could have unintended consequences for Federal Reserve Chair Kevin Warsh. The announcement, made two weeks after the quarterly refunding, surprised experts, and the 30-year Treasury yield, which had spiked to 5.32%, was slightly below 5.19% as of Aug. 25. Bessent's plan, potentially funded from the Treasury's $1 trillion general account, aims to reduce supply and lower yields, but it may conflict with Warsh's hawkish stance on inflation and balance-sheet reduction. Economists warn of fiscal dominance, where the Fed takes cues from the Treasury, and a possible weakening of the dollar, which could fuel inflation. The move raises questions about who truly drives policy and may undermine market confidence in Warsh's inflation-fighting credibility.
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Netflix IncTreasury buyback plan may undermine Fed credibility and weaken dollar, potentially fueling inflation and pressuring yields.
