The Treasury is Trying to Calm the Bond Market. Is It Working?

This story will be featured in the upcoming Financial Poise Weekly newsletter.

With investors becoming harder to convince to buy US debt, the Treasury is trying to win them back. Treasury Secretary Scott Bessent has pledged to increase purchases of long-term Treasuries and hinted at further measures to steady the bond market. But so far, investors aren’t sold.

According to Joy Wiltermuth and Isabel Wang from MarketWatch:

• The Treasury’s initial intervention provided only temporary relief. Long-term yields quickly rebounded after initially falling, with the 30-year Treasury yield remaining near a 19-year high and the 10-year yield near a one-year high, according to Dow Jones Market Data.
• Buybacks can only do so much. They may help improve liquidity in the Treasuries market, but they don’t reduce the amount of debt the government ultimately needs investors to absorb.

Our take? Uncle Sam can’t buy its way out of the underlying problem. Buybacks may help calm the market temporarily, but they don’t change the fact that the US government has an enormous, growing debt burden to finance.

Ultimately, investors will decide what return they need to keep lending the Treasury money. And right now, the cost of convincing them appears to be rising.

Oh, and more importantly, our thanks go out (and so should yours) to Peter J. Peterson and Stanley Druckenmiller!