Bessent says upsized US bond buybacks could increase further

US Treasury Secretary Scott Bessent indicated on Thursday that he might raise the amount of US government bonds he is willing to repurchase, following a surprise plan to double the quantity the previous day. In a CNBC interview, Bessent stated that the buyback volume could surpass the initial $4 billion per issue. The Treasury Department had announced on Wednesday the doubling of buybacks on longer-dated securities for the upcoming quarter, aiming to raise them to at least $4 billion.

This move helped stabilize the surge in 30-year bond yields, which had reached 19-year highs. The 30-year yield had rebounded temporarily, but Bessent's remarks temporarily reduced the increase, with the yield settling at 5.24%. The Treasury Secretary's goal was to bolster liquidity in a market segment that is relatively thin, particularly in August, amid heavy corporate issuance at higher yields, including for artificial intelligence infrastructure.

Bessent emphasized that his intention was both to signal confidence in the yields and to assert that they do not fully reflect the underlying fundamentals. Despite the Iran conflict, which remains unresolved, Bessent expressed optimism that the situation would improve over time. Additionally, the Treasury Secretary announced that the White House budget director, Russell Vought, along with him, would initiate a fiscal consolidation effort directed by President Donald Trump.

This effort, coupled with waste, fraud, and abuse reduction measures, could potentially uncover several hundred billion dollars in savings. Bessent clarified that the $40 trillion debt threshold was not particularly significant and that the US would eventually grow its way out of the debt. Furthermore, he attributed the year's increased deficit to the refunds of Trump's tariffs, which were declared illegal by the Supreme Court and would not recur in the following year due to new tariffs implemented under different trade laws that had withstood legal challenges.

Lastly, Bessent noted that he anticipated 2026 tariff revenues to be on par with those of 2025, but did not specify whether he was referring to calendar or fiscal years. The expected factory and data center construction, immediately expensed against corporate profits under the Republican 2025 tax cut act, contributed to a decline in corporate tax revenues.