Scott Bessent's initial attempt to stabilize the $32 trillion US government debt market has been met with skepticism from investors, who argue that his $6 billion bond-buying programme was insufficient to prevent a further rise in borrowing costs. The yield on the 10-year Treasury note, a key benchmark for global asset pricing, climbed this week to its highest level in nearly three years, approaching the 5 percent threshold that many on Wall Street consider a warning sign.
The Treasury's intervention followed a surprising announcement in August, when Bessent, the Treasury secretary and former hedge fund manager, launched the buyback operation to combat what he described as a “fever” in the market. The move, part of a broader, more activist strategy that also included a currency intervention to support the yen against the euro late last month, aimed to temper the spike in yields. However, numerous investors and analysts criticized the programme’s scale and execution.
“We typically haven’t seen interventionist policies coming out of the US,” noted Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management and a member of the Treasury Borrowing Advisory Committee. She expressed concern that such actions resemble those of emerging markets rather than the world’s largest economy. “There are emerging market-type risks in some of the actions the US has been taking,” she added.
The buying operation was upsized to a maximum of $6 billion, compared with the initial estimate of at least $4 billion, but the Treasury ultimately accepted $5.2 billion in offers from investors to sell bonds. Some market participants expected a more substantial effort, suggesting that the relatively modest scale signaled hesitancy. Vincent Mortier, chief investment officer at Amundi, remarked that the intervention “does not solve the broader challenge” of rising yields and that the signal it sends might undermine market confidence by indicating nervousness within the US government.
The rise in Treasury yields has been driven by several factors beyond the buyback programme’s reach, including an unexpected surge in oil prices fueled in part by ongoing geopolitical tensions surrounding the Iran conflict. Brent crude briefly climbed close to $110 per barrel before falling below $105, contributing to inflation concerns. President Donald Trump also indicated this week that the war with Iran and associated high energy costs could persist beyond the November midterm elections, further unsettling markets.
Compounding these worries are concerns about rising US government debt, which recently surpassed $40 trillion. Market unease deepened after Trump proposed a $5,000 payment to all American adults if Republicans maintained control in the midterms, a plan estimated to cost more than $1 trillion. At the same time, optimism about strong economic growth driven by advances in artificial intelligence has not been enough to counterbalance the pressures pushing yields higher.
Despite some mixed signals—in particular, a “strong” recent 30-year debt auction characterized by high demand and record-low purchases by primary dealers—a number of investors remain unconvinced by Bessent’s approach. Mark Cabana, head of US rates strategy at Bank of America, described the Treasury’s tactics as “doing things on the cheap” and inconsistent with a “whatever it takes” stance expected in such a situation. Bill Campbell, a portfolio manager at DoubleLine, argued that any intervention's initial move needs to be robust to be effective, suggesting Bessent’s first effort was too small to influence market dynamics meaningfully.
As borrowing costs continue to rise amid persistent inflation worries and record government deficits, market participants remain watchful for further actions from the Treasury. Bessent, who has sought to assert control over treasury market movements with assertive remarks such as “I am the house” in reference to the yen intervention, faces ongoing challenges in restoring confidence and stabilizing yields.