Are the walls closing in on Bessent?
Far from suggesting financial Armageddon, the US treasury secretary’s futile efforts to keep a lid on Treasury yields suggest that once again, the dollar is America’s currency but everyone else’s problem.
US Treasury Secretary Scott Bessent faces mounting pressure to manage the cost of servicing America's debt, which has surpassed 100 percent of gross domestic product. The treasurer, a former capital markets executive at Soros Fund Management, is attempting to stabilize Treasury yields through a series of interventions.
Initially, a joint effort between the US and Japan aimed to support a weak yen. However, Japan would have had to sell US Treasuries to provide the necessary funds, which would have been unprecedented. Bessent then proposed an alternative solution, suggesting that Japan could access dollars to bolster the yen through the Foreign and International Monetary Authorities Repo Facility. He also advocated for raising the borrowing ceiling to support dollar funding more broadly.
Bessent has also committed to doubling long-dated buybacks to "at least" $4 billion per operation. However, this strategy may not be as effective as hoped, as the US Federal Reserve's purchasing power is significantly greater. The Fed's daily Treasury purchases during the pandemic peaked at around $75 billion, while the Treasury cannot match this level of activity.
Despite these efforts, Bessent's interventions have not yielded the desired results. The 30-year yield, which had reached its highest level since 2007 just before Bessent's announcement, has since fallen temporarily before rebounding. This has left bondholders confused and put Bessent, who considers himself the "nation's top bond salesman", in an uncomfortable position.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
