Scott Bessent’s running battle with the bond market is starting to look like his boss’s war in Iran — started by his own hand with a tangled set of objectives, an underestimated opponent and an implausible path to victory. And like the conflict in the Middle East, we are all going to suffer its effects.
The latest skirmish came on Wednesday when, in an unscheduled announcement, Bessent’s US Treasury department announced that it would double the pace at which it buys back its own long-term bonds. Buybacks in themselves are a pretty standard bit of financial housekeeping, but to bond market wonks, a few things stuck out.
One is the unscheduled nature of this move. Painstaking predictability is the name of the game in dealing with the $32tn US government bond beast, particularly with the longer maturities. Bond investors do not like surprises, often reading support measures as an admission that something somewhere has broken.