Trump: Did Not Direct Bessent to Intervene in U.S. Bond Market; Economic Growth Will Resolve Debt Issues

U.S. President Trump spoke on Friday, the 21st local time, addressing multiple issues including the U.S. bond market, the situation in Iran, and North American trade negotiations.

Regarding the recent expansion of long-term U.S. Treasury buyback operations by the U.S. Department of the Treasury, Trump stated that he had not instructed Treasury Secretary Bessent to intervene in the U.S. bond market, asserting that U.S. economic growth would resolve the national debt problem on its own.

On the issue of Iran, Trump claimed that the U.S. has "completely controlled the entire region" and that Iran "might" reach an agreement with the U.S., but is currently "not ready" to do so. Discussing the United States-Mexico-Canada Agreement (USMCA), Trump stated that the U.S. "should be able to reach an agreement with Canada," noting that negotiations are "proceeding smoothly," and that the U.S. has also initiated a new agreement with Mexico.

Judging from Trump's overall remarks on Friday, the signals he attempted to send to the market were quite clear: the U.S. debt issue relies more on economic growth and fiscal consolidation for resolution; the Iran issue involves maintaining negotiation space while continuing economic pressure; and North American trade negotiations continue to advance.

For financial markets, two upcoming time points are particularly noteworthy: first, the fiscal consolidation plan expected to be announced by the Trump administration this weekend or early next week; second, the press conference on economic actions against Iran scheduled for August 24, as previously indicated by Bessent. The former will test Trump's policy path of "resolving debt through economic growth," while the latter could further impact U.S. inflation and the U.S. bond market through sanctions and oil price channels.

Bessent Says U.S. Bond Market "Toolbox" Is Vast, With Room to Increase Buyback Scale

As Trump made these remarks, the U.S. bond market had just experienced a round of significant volatility.

On Wednesday, the U.S. Department of the Treasury announced that it would at least double the scale of liquidity support buyback operations for 10- to 30-year U.S. Treasuries, raising the single-operation size to at least $4 billion. Following the announcement, long-term Treasury yields initially fell but quickly rebounded on Thursday, with the 30-year Treasury yield rising back to around 5.26%, indicating that the market remains skeptical about whether buyback measures can sustainably suppress long-end yields.

Also on Thursday, Bessent further signaled that the Treasury Department might take additional action. He stated that the scale of single long-term Treasury buybacks could exceed $4 billion, emphasizing:

"We have a large toolbox, so stay tuned."

Bessent also noted that the current U.S. bond market is a thinly traded segment, particularly lacking liquidity in 30-year Treasuries. In his view, long-term Treasury yields do not fully reflect the fundamentals of the U.S. economy.

Regarding how large the buyback scale could ultimately become, Bessent stated that it would depend on market conditions.

On Friday, Trump explicitly clarified that he had not directed Bessent to intervene in the bond market. This statement implies that the White House wishes to attribute the core logic for resolving the U.S. debt problem more to economic growth rather than relying solely on Treasury market operations.

Trump Shifts Focus to Fiscal Consolidation

Trump's emphasis on economic growth being able to resolve the U.S. national debt problem aligns somewhat with the fiscal policy signals recently released by Bessent.

On Thursday, Bessent revealed that Trump had tasked him and the Director of the Office of Management and Budget to jointly lead a new fiscal consolidation plan, expected to be announced this weekend or early next week.

This means that while the Treasury Department improves liquidity in the long-end U.S. Treasury market through buybacks, the Trump administration is also attempting to address market concerns about U.S. debt sustainability from the expenditure side.

The U.S. national debt has exceeded $40 trillion, and persistently high long-term Treasury yields mean that government financing costs are rising further. Reuters previously pointed out that fiscal deficits, inflationary pressures, and corporate financing demands—especially from AI-related companies—are all structural pressures facing long-end yields recently.

Whether Treasury buybacks themselves can change this trend remains a subject of considerable caution in the market. After the Treasury expanded buybacks, the 30-year Treasury yield only briefly declined before rising again, indicating that investors do not believe buybacks are sufficient to solve long-term debt supply and demand issues.

Trump's current emphasis on "economic growth" offers an alternative policy logic: if the U.S. economy and productivity can continue to grow, the expansion of the economic scale will ultimately reduce the debt burden.

Iran May Reach an Agreement, But Trump Says Tehran Is Not Ready Yet

Turning to the Iran issue, Trump's remarks on Friday highlighted the possibility of parallel "pressure + negotiation" rather than simply emphasizing sanctions.

Trump stated that the U.S. has "completely controlled the entire region" and that Iran might eventually reach an agreement with the U.S., but is currently not ready to do so.

This implies that although the Trump administration continues to ramp up economic pressure on Iran, the White House has not completely closed the door to diplomatic negotiations.

Meanwhile, on Thursday, Bessent released stronger economic signals. He stated that the U.S. is prepared to implement "unprecedented economic isolation" measures against Iran and revealed that the U.S. will hold a press conference on August 24, next Monday, to detail the action plan against Iran. Related reports indicate that the Trump administration is attempting to force Iran to make concessions by further strengthening economic and financial pressure.

Bessent had previously stated that this round of economic pressure could reduce the necessity for the U.S. to relaunch large-scale military operations.

Trump's statement on Friday that Iran is still "not ready" to reach an agreement implies that Washington is currently in a phase of continuing pressure while waiting for Tehran to change its stance.

Oil Prices Become Another Test for the Iran Pressure Plan

The importance of the Iran issue to U.S. economic policy also lies in energy prices.

On Thursday, Bessent stated that he "did not understand" why oil prices suddenly rose that day and claimed that the economic actions the U.S. is about to announce will drive oil prices down faster.

However, oil prices have recently become an important risk variable for the U.S. long-term Treasury market. If the situation in Iran further pushes up crude oil prices, it could renew pressure on U.S. inflation and transmit to long-term Treasury yields through inflation expectations and Federal Reserve policy expectations.

This means that after the U.S. announces specific economic actions against Iran next Monday, the market will not only focus on the sanctions themselves but also on their actual impact on Iranian oil exports, regional supply, and global oil prices.

Trump Says U.S.-Canada Negotiations Are "Proceeding Smoothly," New U.S.-Mexico Agreement Initiated

On North American trade issues, Trump released relatively positive signals on Friday.

Discussing trade relations among the United States, Canada, and Mexico, Trump stated that the U.S. "should be able to reach an agreement with Canada" and described current negotiations as "proceeding smoothly."

At the same time, Trump revealed that the U.S. has initiated a new agreement with Mexico.

This means that against the backdrop of potential adjustments to the USMCA framework, the Trump administration is advancing trade negotiations with Canada and Mexico separately.

If the U.S.-Canada negotiations ultimately achieve a breakthrough, it will help reduce uncertainty in North American trade policy; meanwhile, the initiation of a new U.S.-Mexico agreement indicates that the U.S. government hopes to continue reshaping North American supply chains and trade rules through bilateral negotiations.

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