Treasury Secretary Scott Bessent must be feeling chafed. Last month, amid rapidly rising interest rates on federal debt, he announced that his department would double its typical longer-term bond buybacks, from $2 billion to $4 billion. The idea was that, by boosting demand for Treasuries, yields might come down and the government would be able to borrow additional money at lower cost.
And yields did come down a little bit — for about a day. Then they shot right back up to where they began.
Since then, Bessent has announced that the government’s bond buybacks would, in fact, be tripled to $6 billion. And what has happened in the bond markets? From the Wall Street Journal: “The U.S. 10-year Treasury yield traded as high as 4.921% Thursday, its highest intraday level since October 2023.” Except for 2023, 10-year bond yields are now higher than at any level since 2007.
Incredibly, Bessent’s promise to buy $6 billion of a $29.5 trillion Treasury market didn’t quite get the job done. It turns out that mounting inflation pressure, surging oil prices, and the sheer enormousness of U.S. debt accumulation with no slowdown in sight outweighed the Treasury Department’s intervention.
There is no one neat trick to address spiraling interest costs on the national debt. Rates will rise however high the bond market thinks appropriate given our evidently limitless appetite for fiscal risk. Ask yourself, at what interest rate would you lend money to the federal government these days?