Treasury yields jump as Bessent’s $6bn buyback plan disappoints investors

{"text":[[{"start":13.612,"text":"US government bond yields rose to their highest in almost three years after Treasury secretary Scott Bessent’s $6bn buyback plan disappointed investors in the world’s most important debt market."}],[{"start":25.74,"text":"The Treasury department said on Wednesday that it would purchase $6bn in government debt in the first buyback operation since Bessent unveiled the expanded scheme last month to arrest a rise in borrowing costs."}],[{"start":38.8,"text":"The new figure is a step-up compared with Treasury’s vow to “at least” double its purchases of long-term bonds to $4bn, refashioning the existing programme to bolster prices in the $32tn US Treasury market. But it is lower than estimates of $8bn and $10bn circulated by Wall Street analysts this week."}],[{"start":58.88,"text":"Treasury yields rose following the announcement, with the 10-year note rising 0.05 percentage points on the day to just below 4.86 per cent, its highest level since late 2023. Moves in the 20- and 30-year yields were roughly the same size."}],[{"start":81.18,"text":"“This number [$6bn] is a disappointment; there was an expectation that Bessent would do more. That’s why yields are up,” said Mike O’Rourke at Jones Trading. “Personally, I think he should abandon this policy entirely.”"}],[{"start":89.12,"text":"Krishna Guha at Evercore ISI said markets appeared “underwhelmed” by the $6bn figure, noting that “some investors had bet on a much bigger shock-and-awe announcement of $10bn or even more”."}],[{"start":null,"text":"

"}],[{"start":101.72,"text":"The buyback intervention marks the latest test for Bessent, who has been repeatedly deployed by President Donald Trump to calm market nerves. On Tuesday, the Treasury secretary dared markets to bet against him over a separate intervention to prop up the Japanese yen."}],[{"start":117.32,"text":"“I have asymmetric information. I am the house now,” he said. “You can bet against me if you want.”"}],[{"start":121.32,"text":"Treasury yields eased in the afternoon from session highs following a $39bn 10-year auction that received solid demand as investors took advantage of the bump higher in borrowing costs. The debt was sold at a yield of 4.834 per cent, up from 4.683 per cent at a previous auction on August 12."}],[{"start":140.98,"text":"In a sign of the strength of the auction, primary dealers — big banks that are responsible for absorbing any supply not bought by investors — purchased the smallest portion of a 10-year offering since September 2025, according to Vail Hartman, an analyst at BMO Capital Markets."}],[{"start":157.68,"text":"Bessent hopes the expanded buybacks will halt the recent sell-off in long-term US debt, which he has insisted does not “reflect the underlying market fundamentals”."}],[{"start":166.96,"text":"Higher long-dated bond yields raise borrowing costs for US consumers — notably on mortgages — as well as for companies seeking to raise cash. US yields are also a benchmark for trillions of dollars in assets worldwide."}],[{"start":180.44,"text":"The new Treasury policy has faced criticism from Wall Street, with investors warning it could undermine the agency’s credibility and work against the Federal Reserve’s efforts to tame stubbornly elevated inflation. Investors are also uncertain whether the operation will succeed in bringing yields lower."}],[{"start":196.94,"text":"The initial $4bn announcement last month failed to produce any lasting effect on bond yields, which are hovering at multiyear highs thanks to a domestic economy firing on all cylinders, inflationary pressures from the war in Iran and worries about the growing size of the US deficit."}],[{"start":212.56,"text":"“I’m not sure how much of an effect these buybacks will ultimately have on the Treasury market,” said Subadra Rajappa, head of US research at Société Générale, referring to expectations the operations could help lower bond yields."}],[{"start":225.32,"text":"“It shows an understanding of the importance of the long-end sell-off. But I just think broadly the thing they need to address is the direction of the debt and deficit. Everything else is cosmetic.”"}],[{"start":235.04,"text":"In a buyback, a trader gives the Treasury department a 10-, 20- or 30-year bond sold in years past, which is less liquid, in exchange for the most recent issuance of that bond."}],[{"start":244.76,"text":"The programme aims to improve the liquidity of the market, making it easier for traders to buy and sell large chunks of bonds without creating exaggerated price moves."}],[{"start":253.54,"text":"The Treasury will on Thursday morning make the final announcement about bonds eligible for buyback and then conduct the operation from 1.40pm to 2pm Eastern time. The results of the operation will be published shortly after 2pm."}],[{"start":268.28,"text":"The agency will also hold a further auction for 30-year bonds on Thursday. The yields at which those bonds are sold will signal whether markets have faith in Bessent’s attempts to lower yields."}],[{"start":279.36,"text":"“Over the last few weeks, Secretary Bessent has engaged in financial engineering in order to put downward pressure on long yields,” said Michael Strain, an economist at the right-leaning American Enterprise Institute."}],[{"start":291.48,"text":"“I don’t believe that any attempts at financial engineering will overpower the force of economic fundamentals.”"}],[{"start":302.72,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789008843_6990.mp3"}