US bond sell-off resumes despite Treasury intervention

US bond yields surged on Thursday despite Treasury Secretary Scott Bessent's vow to potentially intervene further to lower borrowing costs. The Treasury Department had announced on Wednesday plans to at least double its sovereign bond buy-backs after the 30-year yield climbed to near two-decade highs on Tuesday. While the announcement initially pushed rates lower on Wednesday, yields rose again on Thursday, signaling skepticism that the plan would succeed.

Bessent stated that the Treasury has a "big toolkit" to address rising yields, potentially including increased bond purchases beyond the previous scale. He believes the yields do not reflect underlying fundamentals, hoping inflation issues will ease once the United States recovers from the Iran war and oil prices fall. Analysts attribute the yield increase to high oil prices, AI investment costs, and the government's deficit.

Uncertainty surrounding the upcoming Federal Reserve Chair, Kevin Warsh, also contributes to the market's volatility. Eyes are now on the Jackson Hole annual meeting, where investors hope for insights into Warsh's outlook on interest rates. The Treasury's unscheduled intervention highlights its concern over the recent sell-off of longer-dated US bonds, but a more structural solution, such as fiscal consolidation, is needed for sustainable bond market improvement.