Treasury Secretary Scott Bessent's Bond Buyback Plan Faces Market Resistance

Scott Bessent, the US Treasury Secretary, has announced plans to double the size of bond buyback operations for longer-dated Treasuries, increasing from $2 billion to at least $4 billion per operation starting September 9, 2026. This strategy aims to reduce supply, prop up prices, and ultimately push yields lower, which are crucial for controlling borrowing costs across the economy.

However, the bond market has reacted unfavorably to this initiative. Following the announcement, yields on the 10-year Treasury remained between 4.69% and 4.73%, while the 30-year yield reached levels not seen since 2007, settling between 5.23% and 5.27%. Analysts attribute this resistance to several factors, including the sheer scale of US public debt exceeding $40 trillion and persistent inflation around 3.7%, which pressures bond investors to demand higher yields.

Critics argue that Bessent's approach may undermine the credibility of US fiscal policy, as the market appears to reject the notion that the Treasury can effectively manage yields through buybacks alone. The ongoing high yields have broader implications, affecting mortgage rates and corporate borrowing costs, which could hinder economic growth.