The Sky Isn't Falling in the U.S. Treasury Market

Treasury Secretary Scott Bessent has described himself as the “nation’s top bond salesman.”

This week, the Treasury Department expanded an age-old sales tactic, offering a trade-in deal in which the market could exchange old bonds for new. The market reacted to this by bidding up bond prices, pushing down yields. Quite a few economic pundits, apparently high from sniffing the fumes of Trump Derangement Syndrome, decided that this meant the sky was falling.

More specifically, Treasury announced Wednesday that it would raise the maximum size of its buyback operations for bonds with between 10 and 30 years remaining until maturity. Beginning September 9, the limit will rise from $2 billion to at least $4 billion per operation.

This was immediately described by some as a radical intervention in the bond market, an attempt by Bessent to impose his will on interest rates, and even a form of quantitative easing. Because the announcement came one day after the yield on the 30-year Treasury climbed above 5.3 percent, its highest level in 19 years, and in the same week that the debt of the government crossed $40 trillion for the first time in history, it was all too easy for some to depict this as a crisis.

As we explained earlier this week, however, rising bond yields were a testament to economic strength not weakness, despite the financial media’s insistence that it was somehow due to “investor anxiety.” Similarly, the Treasury’s buyback announcement—which is an adjustment to a program begun by Janet Yellen during the Biden administration—does not signal that the sky is falling.