In this week’s podcast, we ask whether Scott Bessent is losing control of the U.S. bond market — as long-term Treasury yields surge despite government intervention. We unpack what’s driving the bond selloff, from soaring deficits and a $40 trillion national debt to inflation risks and growing Treasury supply, and whether Bessent’s attempts to push yields lower can work without addressing the deeper problems underneath.
Key Talking Points
- Bond yields have risen sharply: U.S. 10-year yields climbed from around 4% to above 4.7%, after a much larger rise from pandemic lows.
- Bessent is targeting long-term yields: The Treasury is issuing more short-term debt while buying back some longer-term bonds.
- Treasury policy is entering Fed territory: Bessent’s actions resemble quantitative easing, creating tension with the Fed’s preference for higher yields to help contain inflation.
- Lower yields could support markets: Reduced bond yields may help mortgage costs, stock markets, and the U.S. dollar, while potentially boosting gold and Bitcoin.
- The intervention is relatively small: Current bond purchases are far below the scale of previous quantitative-easing programs.
- Fundamentals still matter most: High inflation and solid economic growth continue to create upward pressure on interest rates.
- Bessent may reduce extreme volatility: His interventions could discourage highly leveraged, one-way bets in the bond market.
- Bond-market stability could shift risk elsewhere: Lower bond volatility may encourage investors to take more leveraged positions in stocks.
- Yields are not expected to collapse: The outlook remains for higher bond yields, but with less risk of sudden extreme movements.
- Inflation-linked bonds remain attractive: The discussion favors inflation-linked bonds because real yields could decline while inflation risks remain elevated.
- Key indicators to watch: Investors should monitor inflation, oil prices, tariffs, geopolitical risks, and strong AI-related demand.
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Damien Klassen is Chief Investment Officer at the Macrobusiness Fund, which is powered by Nucleus Wealth.
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The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Damien Klassen is an Authorised Representative of Nucleus Advice Pty Limited, Australian Financial Services Licensee 515796. And Nucleus Wealth is a Corporate Authorised Representative of Nucleus Advice Pty Ltd.