Jumpy bond markets make it clear: Trump risks driving US into debt crisis | Heather Stewart
Treasury secretary Scott Bessent’s attempt to calm bond markets is a sign of weakness not strength “Look, there’s nothing magic about that $40tn number,” the US Treasury secretary, Scott Bessent, told CNBC insouciantly last week, as the country’s debt mountain surpassed another bleak record. Yet Bessent’s decision to intervene in government bond markets in an effort to combat soaring yields,…
Recent bond market fluctuations indicate that President Trump may be leading the United States towards a potential debt crisis. Treasury Secretary Scott Bessent's efforts to calm markets have been perceived as a sign of weakness rather than strength. When Bessent intervened in government bond markets to combat soaring yields, it reignited fears that the US might be heading towards a debt crisis.
Similar to his role in the 1992 UK crisis, Bessent's intervention in the markets suggests he is on the opposite side of the policymakers and markets' struggle.
The intervention came as Japan, a significant holder of US treasuries, was reportedly preparing to sell some of its holdings to purchase yen. The Treasury's announcement that Japan could borrow against its treasury holdings without selling them was viewed as an indication of concern. In the latest intervention, Bessent promised to double the rate at which the Treasury would buy up the longest-dated bonds to bring down yields.
This move is a clear sign of anxiety in Washington about a possible sell-off that has pushed up yields on 30-year government bonds to levels not seen since the 2008 global financial crisis.
Several factors have contributed to the bond market sell-off, including inflation, AI investment boom, and concerns about the US fiscal position. High inflation is eroding the real value of treasuries, which pay fixed annual amounts. The AI investment boom has resulted in $219bn of corporate debt issuance by tech giants, potentially diverting investors from treasuries.
Most concerning is the perception that the US is no longer the reliable creditor it once was. US public debt has increased dramatically over the years, with the independent Congressional Budget Office predicting that it will rise to 175% of GDP within the next 30 years without significant policy changes. President Trump's unpredictable actions, unresolved conflicts, and tariff regime contribute to this growing instability.
Written by urgent.news from Guardian Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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