- The Treasury announced it will double the bond buyback program to $4 billion per operation starting next month.
- Bessent stated on CNBC that the bond repurchase program could be larger than $4 billion, asserting that yields don't reflect the underlying fundamentals.
- Yields initially dipped following the announcement but quickly rebounded, with analysts describing the impact as minimal.
- Bessent indicated that the administration would announce a new deficit reduction effort possibly by Monday.
- Fed chair Kevin Warsh is under pressure to clarify his approach during a speech at the Jackson Hole conference next Friday.
- Despite the huge deficit for years, the annual gap between government revenue and spending is projected to top $2 trillion this year, a significant figure outside of recessions.
- Bessent's interventions have been criticized as ineffective, with analysts suggesting that the bond buyback plan may not have a lasting impact on yields.
- The market remains skeptical about the Treasury's ability to stabilize yields, with analysts noting that the size of the buybacks may be insufficient given the market's scale.
Treasury Secretary Scott Bessent's recent bond-market interventions, including a proposed increase in bond buybacks to $4 billion, have not successfully lowered yields, which remain high at 4.69% for 10-year notes.1
Bessent stated on CNBC, "We have a big toolkit so we’ll see. We believe that the yields don’t reflect the underlying fundamentals." However, skepticism persists among analysts regarding the effectiveness of these measures.2
Gennadiy Goldberg from TD Securities noted that reducing the deficit is mostly up to Congress, indicating that Bessent's plans may not yield the desired results.
The Congressional Budget Office has projected that the annual gap between government revenue and spending will exceed $2 trillion this year, raising concerns about fiscal sustainability.6
Bessent's dual approach of accelerated buybacks and market communication has faced criticism, with analysts suggesting it has had "minimal impact" on market pressures.3
Evercore ISI's Krishna Guha described the buyback plan as "a weak form of Operation Twist", indicating doubts about its long-term effectiveness.
As inflation concerns mount, driven by rising oil prices and increased borrowing by tech companies, Bessent's strategies may struggle to stabilize the bond market amidst these challenges.
“The 10-year Treasury yield rose back to 4.69% Thursday, near its level before the buyback announcement, while the 30-year yield hit 5.23%. Analysts like Evercore's Krishna Guha call the plan a 'weak form of Operation Twist' that may have little lasting impact.”
AP News
CNBC
