The bond market can be tricky for even its most sophisticated and well-armed participants. <\/p>\n
Just witness how Scott Bessent<\/a> lately has attempted interventions to suppress interest rates \u2014 only to see them surge higher.\u00a0<\/p>\n Mind you, I say this as an observer who appreciates our Treasury secretary\u2019s bids to save the US economy from a potential credit chokehold that could spark a recession. <\/p>\n He\u2019s working for a debt-ridden nation that faces higher borrowing costs across the board. <\/p>\n He also works for a president who has shown little internal fortitude to cut spending.\u00a0<\/p>\n When he took over last year, the former hedge funder\u2019s plan was classic supply-side economics: tackle the anemic growth and inflation of the Biden years by cutting taxes and slashing regulatory curbs on economic activity like drilling that usually benefits consumers.\u00a0<\/p>\n \t\t\tMore From\t\t\t\t\t\t\tCharles Gasparino<\/p>\n But managing a $32 trillion economy with $40 trillion in debt isn\u2019t simple. <\/p>\n Yes, inflation is lower than when Sleepy Joe and his equally inept Treasury Secretary Janet Yellen were running things. <\/p>\n But the Iran conflict<\/a> and its impact on oil and gas prices have been stoking inflation fears and causing rates to rise.\u00a0<\/p>\n Friday\u2019s hot inflation number, my sources on Wall Street tells me, almost guarantees a Fed short-term \u201cfed funds\u201d rate hike later this month and probably one more later in the year.\u00a0<\/p>\n AI\u2019s borrowing mess\u00a0<\/p>\n Already goosed by all of the above and Trump\u2019s tariff agenda, longer-term rates controlled by traders lately have been climbing further because of the AI buildout<\/a>.<\/p>\n AI was supposed to be a no-lose proposition, adding to GDP and wage growth for blue collar workers. Productivity gains were expected to suppress inflation and interest rates.\u00a0<\/p>\n Instead, AI\u2019s downside is what we are experiencing now: Data centers need capital that is vying for investor attention, raising the US government\u2019s borrowing costs as it\u2019s forced to pay higher rates to compete for buyers.\u00a0<\/p>\n Meanwhile, there\u2019s a lot riding on keeping interest rates stable. <\/p>\n The midterms are coming and higher rates on Treasury bonds, particularly the 10-year, means higher rates on everything from mortgages to credit cards that are priced off that security.\u00a0<\/p>\n In response, Bessent has been turning to the Treasury Department\u2019s slush fund to buy US government bonds. <\/p>\n As every student of Debt Trading 101 knows, a flurry of bond buying tends to increase bond prices, which move in the opposite direction from the interest rates they carry, known as yields. <\/p>\n Just last week, the Treasury announced plans to spend $6 billion on US bond repurchases to quell rates.<\/p>\n Yet instead of going down, yields have been surging to multiyear highs, crossing to 4.97% on the 10-year on Friday \u2014 perilously close to 5%, where many traders fear things could start to go haywire with the economy.\u00a0<\/p>\n In other words, welcome to the wacky world of the bond market that Bessent should have seen coming.\u00a0<\/p>\n \t\t\t\t\t\t\tCharlie Gasparino has his finger on the pulse of where business, politics and finance meet\t\t\t\t\t\t<\/p>\n \n\t\t\t\t\t\t\tSign up to receive On The Money by Charlie Gasparino in your inbox every Thursday.\t\t\t\t\t\t<\/p>\n \t\t\t\t\t\tThanks for signing up!\n\t\t\t\t<\/p>\n Destined to fail\u00a0<\/p>\n A little background: I cut my teeth as a financial reporter covering bonds. <\/p>\n