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With the midterm elections less than three months away, President Donald Trump\u2019s Treasury Department is starting to look desperate about the soaring cost to borrow.<\/p>\n
The Treasury said it would increase its buybacks of longer-term government bonds \u201cby at least double\u201d, an amount that analysts figure would bring purchases to $US32 billion ($45 billion) per quarter. Make no mistake about the motivations: 30-year bond yields this week hit their highest since 2007, pushing borrowing costs higher for the government, businesses and consumers.<\/p>\n
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US President Donald Trump and Treasury Secretary Scott Bessent. Bessent\u2019s Treasury has so far failed in its stated goal to get longer-term borrowing costs lower.Bloomberg<\/p>\n
Key mortgage rates are back up to around 7 per cent, a fresh blow to voters that were promised easier financing conditions under this government and ended up getting more of the same. US public debt surpassed $US40 trillion for the first time, and has now surged by a third in less than five years, as US lawmakers continue to shrug off calls to contend with historically wide fiscal deficits.<\/p>\n
In many ways, hedge fund manager turned Treasury Secretary Scott Bessent is doing his best impression of King Canute, whose attempt to command the incoming tide to stop inevitably failed.<\/p>\n
The Treasury described the buybacks, planned to start September 9, as a form of \u201cliquidity support\u201d \u2014 which is what they were intended to be when the program was created in 2024. In this case, \u201cliquidity support\u201d is a clever euphemism for \u201cplease bring yields down!\u201d<\/p>\n
Related Article It\u2019s an inappropriate co-opting of a program that was created to improve market functioning and the government\u2019s cash management, and, as explicitly described by the previous administration, was \u201cnot intended to ameliorate periods of acute market stress\u201d \u2014 like now. But that\u2019s the way the market sees it, driving yields on 30-year Treasuries lower by as much as 0.10 percentage point on the news.<\/p>\n The market\u2019s reaction isn\u2019t surprising. This is only the latest ill-conceived attempt at influencing market forces by the Bessent treasury, which has failed in its stated goal to get longer-term borrowing costs lower. In the administration\u2019s 19 months in office, he has adjusted capital requirements to encourage banks to hold more bonds; supported the GENIUS Act which established a framework for stablecoins to invest in US government securities; and authorised US support for yen intervention, a move that looked custom-designed to dissuade a major foreign holder of Treasury bonds from dumping them to buy its own currency.<\/p>\n Don\u2019t expect today\u2019s bond market move to last very long. For those keeping score, none of the above moves have made much of an enduring difference. The effects of the yen intervention in late July started fading almost immediately<\/a>. And even though the buybacks will double from $US16 billion on a quarterly basis, it\u2019s still minuscule given both the size of the $US31.5 trillion Treasury market and the massive global forces keeping longer-term Treasury yields from falling.<\/p>\n For one, inflation is making a comeback in Japan after a quarter of a century of quiescence. Japanese 10-year government yields, which compete for the money of foreign investors with Treasuries, are now roughly at their highest in 30 years. With the Bank of Japan expected to resume lifting benchmark interest rates by October, the move higher in yields may be just getting started. In the interconnected global financial system, that\u2019s an earthquake that is being felt in all bond markets \u2013 and certainly not one the US can counteract with $US32 billion of buybacks per quarter.<\/p>\n Also working against Bessent\u2019s scheming is the fact that longer-term investment-grade corporate borrowing has surged to support the buildout of artificial intelligence. Earlier this month, Alphabet sold $US25 billion of bonds in dollars with maturities of up to 40 years. Amazon and SpaceX have likewise been among recent issuers of longer-dated bonds, with bond investors starting to show signs of indigestion.<\/p>\n Where the administration actually has a chance to meaningfully and responsibly impact borrowing costs, it has mostly declined to do so.<\/p>\n Thanks to the extension of tax cuts to the wealthy last year, the US continues to post record budget deficits, with the shortfall on pace to grow by 5 per cent from 2025. Persistently warm inflation, fanned by Trump\u2019s tariffs and the oil shock from his war with Iran, has also done its part to keep borrowing costs higher. (And while Trump didn\u2019t start the inflation, he\u2019s consistently missed the opportunity to end it.)<\/p>\n One generous interpretation of these developments is that Bessent is effectively making a market-timing bet. By combining buybacks of longer-term bonds with issuance that\u2019s front-loaded in shorter-term securities such as Treasury bills, Bessent is wagering that yields will be lower in the months or years ahead \u2013 and that inflation, the AI borrowing glut and the Japanese market moves are transitory. If he is right, Bessent would be vindicated, but it\u2019s the longest of long-shot bets.<\/p>\n Related Article Treasury shouldn\u2019t be in the business of using taxpayer money to time markets like a hedge fund. Don\u2019t forget that Bessent attacked his predecessor, Janet Yellen, for ostensibly similar tactics.<\/p>\n If he\u2019s wrong, which is highly likely, this will all go down as a brash attempt to paper over the reality of global bond markets: yields are going to stay relatively high for a considerable time, and the Trump administration will inevitably disappoint the voters that it courted with the promised lower borrowing costs.<\/p>\n Bloomberg<\/p>\n The Market Recap newsletter is a wrap of the day\u2019s trading. Get it each weekday afternoon<\/a>.<\/p>\n Save<\/p>\n You have reached your maximum number of saved items.<\/p>\n![\"Japanese](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/08\/d08c413182998f3a557e8c5788cea7175ea45ec3.jpeg\")
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High interest rates are weighing on American consumers.Bloomberg<\/p>\n![\"Donald](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/08\/04dec944c97e6093dca164742f365d51453f665d.jpeg\")
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