US borrowing costs rise as attempts to ease rates prove short-lived
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- Scott Bessent and the Treasury announced a bond buyback to ease long-term borrowing costs; 30-year yields initially fell from 5.34% to 5.18% before rebounding to roughly 5.27% by Friday
- Oxford Economics lead analyst John Canavan called the market response 'unsurprisingly short-lived,' while Capital Economics noted Bessent himself confirmed the buyback is 'mainly a signalling mechanism,' not necessarily effective
- US national debt passed $40tn (£29.4tn), more than doubling from just under $20tn in 2016 under spending by both the Trump and Biden administrations
- The dollar weakened against major currencies on bond market volatility, while gold climbed to a more than three-month high as investors sought safety
- Bessent blamed the Biden administration for the situation, telling US media on Thursday: 'We did not get here in a day, we were left with a mess'
- Contributing factors to higher yields included rising oil prices, tech firms borrowing heavily to develop AI with uncertain returns, and tax revenues being outstripped by public spending
Why it matters: Bessent's buyback pushed 30-year yields from 5.34% down to 5.18% briefly before they rebounded to 5.27% by Friday, showing the Treasury's gesture failed to reassure markets. The source notes such yield moves affect mortgage and car loan rates, leaving US households facing elevated borrowing costs while the national debt tops $40tn.
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