BESSENT’S BOND DRAMABessent’s $4 billion bond buyback plan is like ‘rearranging deckchairs on the Titanic given the U.S. national debt of $40 trillion,’ ING says
U.S. Treasury Secretary Scott Bessent made a surprise intervention into the bond market yesterday, promising to “at least double” its buybacks of long-dated bonds, such as the 10-, 20-, and 30-year Treasuries. “The current maximum size of $2 billion per operation will be at least $4 billion per operation.” The buying will start on September 9. A total of up to $128 billion could be spent over the course of a year, The Wall Street Journal estimated.
The intent of the operation is to raise the price of the bonds and thus lower the interest yield on them. Long-dated bonds are used to set interest rates on a wide range of credit products, such as mortgages, car loans and commercial loans. If rates fall, that credit should become cheaper to obtain.
The intervention worked: The yield on the 30-year Treasury fell from over 5.3% to 5.19%, before ticking up a little to 5.218% this morning. (That’s a big single-day decline in bondland.)
Wall Street reacted with … skepticism.
