Bessent Buyback Plan Fails to Calm Bond Market
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- Treasury announced Wednesday it would at least double bond buybacks starting in early September, sending long-end yields tumbling before they rebounded Thursday as analysts questioned whether the plan — potentially exceeding $4 billion — could move a market of that size.
- Bessent appeared on CNBC Thursday insisting the intervention targets market liquidity, not yield-curve control; Evercore ISI's Krishna Guha characterized the appearance as having "minimal impact" and called the plan "a weak form of Operation Twist."
- Jefferies chief U.S. economist Thomas Simons warned the mid-quarter buyback announcement breaks Treasury's long-held "regular and predictable" communication strategy, calling the break in protocol a reduction in overall credibility.
- Bessent retains additional options including larger or more frequent buybacks, smaller longer-dated auctions (an approach he criticized when predecessor Janet Yellen used it), a broader shift toward shorter-maturity debt, or deploying what markets already call the "Bessent put" to catch short-sellers off-guard.
- The U.S. national debt has surpassed $40 trillion with a deficit-to-GDP ratio of nearly 6% — roughly triple the post-WWII-to-Covid average — and Bessent said he will meet soon with OMB's Russell Vought to discuss "fiscal consolidation."
- Moody's Ratings chief credit officer Atsi Sheth pointed to a structural shift in Treasury buyers, with leveraged hedge funds running relative-value strategies filling gaps left by central banks shrinking their balance sheets and traditional duration buyers reaching capacity.
- Bessent suggested he and Fed Chair Kevin Warsh would "work together" on bond-market complications, though Warsh has stressed letting the market set rates.
Why it matters: Bessent is boxed in: bigger interventions risk credibility damage and the optics of fiscal stress, while doing nothing leaves long-end yields free to climb. With the national debt above $40 trillion and a deficit-to-GDP near 6%, as BondBloxx's JoAnne Bianco noted, investors may demand a higher risk premium for Treasurys if they read intervention as panic rather than reassurance.
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