- The day after Bessent launched his expanded Treasury bond buyback program — designed to push down 10-year yields — benchmark yields rose instead, extending a selloff to a fresh three-year high above 4.9%; AEI’s Michael Strain put it bluntly: “He’s tried by my count three times to get the long end of the yield curve to do what he wants it to do and he has failed each time. He’s already lost credibility.”
- Bessent has publicly invoked his “asymmetric information” claim at least four times in three weeks, explicitly daring traders to bet against him on yen, bonds, and oil — and traders are beginning to do exactly that in the bond and oil markets (Brent at $105), even as yen intervention remains a relative success with dollar-yen breaking below 155 toward potential 150 targets.
- Potomac River Capital’s Mark Spindel: “The market has called his bluff” — the structural constraints Bessent cannot jawbone away are a near-$2 trillion federal deficit and an Iran war energy shock that has pushed oil 70%+ higher year-to-date, both of which exert persistent upward pressure on yields that verbal interventions cannot offset without matching fiscal action or geopolitical resolution.
- Despite near-term setbacks, Bessent retains meaningful policy tools: the Treasury could further ramp up buybacks or cut long-term debt issuance sizes, Bank of America strategists say the expanded buybacks are “likely the beginning of a deeper US policy” to cap longer-term yields, and Manulife’s CIO notes Bessent still has “enough credibility, policy tools, and market influence to make investors think twice before putting on crowded positions against him.”
What Happened?
Treasury Secretary Bessent launched his expanded bond buyback program Wednesday, citing a need to “quell fever” in the bond market and arguing that yields “don’t reflect underlying fundamentals.” 10-year Treasury yields rose on the announcement and continued higher Thursday, reaching a fresh 3-year high above 4.9% — the opposite of the intended effect. Meanwhile, Brent crude hit $105/barrel despite Bessent’s repeated claims of asymmetric information advantage on Iran. The yen remains the one area where his intervention has produced durable results: joint US-Japan purchases pushed dollar-yen below 155, and a BOJ rate hike is expected September 18 that would fundamentally support the currency. But in the two markets most critical to American households heading into midterms — bond yields (mortgage rates) and oil (gasoline prices) — the market is moving against him.
Why It Matters?
Bessent’s credibility problem is structural, not tactical. Verbal interventions work when markets believe the intervener has both the will and the capacity to follow through. In 2012, Mario Draghi’s “whatever it takes” worked because the ECB has a theoretically unlimited balance sheet. Japan’s yield curve control worked for years for the same reason. Bessent does not have those tools: the Treasury cannot print money, cannot unilaterally cut the deficit (that requires Congress), and cannot end the Iran war (that requires military or diplomatic resolution). The asymmetric information claim is plausible on yen — where he genuinely coordinates with Japan — but less credible on oil and bonds, where the forces driving prices are geopolitical and fiscal rather than policy-controlled. The risk, as AEI’s Strain notes, is that failed verbal interventions erode the credibility reserve that makes future communications effective.
What’s Next?
The September 15-16 Fed meeting is the most immediate bond market catalyst: if the Fed hikes rates (now a live possibility given Thursday’s PPI data), 10-year yields could move substantially higher from 4.9%. If the Fed holds, Bessent gets temporary relief. But the structural pressures — deficit spending, energy inflation, BOJ Treasury sales to fund yen intervention — remain. Bessent has hinted at “fiscal plans” coming that would credibly reduce the deficit, which he linked to yielding results earlier this year; markets are waiting to see those materialize. Bank of America’s assessment that the buybacks are “the beginning of a deeper US policy” to cap yields suggests the Treasury may escalate further — but at some point, the question becomes whether the cure (Treasury manipulation of its own yield curve) is worse than the disease (naturally high yields reflecting genuine deficit risk).
Source: Bloomberg
