Bessent’s move to cool market ‘fever’ backfires in selloff

Key Points:

• Treasury Secretary Scott Bessent's announcement of a $6 billion buyback of 10- to 20-year government bonds aimed at lowering yields backfired, causing yields to surge to multi-month highs instead of falling.
• The 10-year Treasury yield rose to 4.85%, its highest since November 2023, while the 20- and 30-year yields jumped to 5.3%, triggering a selloff in stocks with the Nasdaq down 0.8% and the S&P 500 down 0.6%.
• Investors view Bessent’s efforts to cap yields as risky, fearing it could lead to escalating interventions if markets test the Treasury’s resolve, especially amid concerns over the growing $40 trillion U.S. national debt and global competition for investors.
• Bessent has recently taken an active role in market interventions, including supporting the Japanese yen to prevent large Treasury bond sales by Japan, signaling a more hands-on approach to managing economic risks.
• Despite these interventions, many economists and investors believe fundamental factors like inflation, debt levels, and geopolitical tensions justify the rising yields, limiting the effectiveness of government efforts to control market movements.