Bessent; Treasury Opens Door to Massive Buybacks
US Treasury Secretary Scott Bessent stated that the government remains open to the possibility of expanding Treasury buyback operations beyond the current US$4 billion per issuance. This statement underscores Washington's readiness to utilize various instruments to alleviate pressure in the bond market and keep yields aligned with economic fundamentals.
Bessent believes that the recent rise in Treasury yields does not fully reflect fundamental conditions. He attributes some of the pressure to market overreaction to headlines amidst thin trading liquidity. Consequently, the government aims to maintain market balance while signaling its readiness to act should volatility escalate.
Previously, the US Treasury Department announced plans to at least double the size of its long-term debt buybacks. However, the initial impact of this policy has begun to wane; 30-year bonds have surrendered some of their gains, and both 10-year and 30-year yields have resumed their upward trend.
Pressure on Treasuries stems from three primary factors: a wide fiscal deficit, inflation concerns linked to the conflict involving Iran, and a surge in corporate financing needs for artificial intelligence investments. Rising yields are also increasingly burdening the cost of servicing US government debt, which has now surpassed a record US$40 trillion.
Bessent also noted that the Trump administration would soon announce a heightened focus on fiscal consolidation. The government intends to review both revenue and expenditure sides, identifying potential savings amounting to hundreds of billions of dollars. He even suggested the possibility that the US deficit has already peaked.
Newsmaker Analysis: Bessent’s statement indicates that the Treasury is not relying solely on buybacks but is formulating a broader strategy to suppress yields and restore market confidence in US fiscal health. If buybacks are expanded and fiscal consolidation is effectively implemented, long-term yields could decline again—potentially weighing on the dollar while supporting gold and equities. However, as long as the deficit, inflation, and financing requirements remain high, the bond market is likely to remain volatile. (arl)
Source: Newsmaker.id
