--- title: "Can Bessent Still 'Stabilize' the Bond Market?" type: "News" locale: "en" url: "https://longbridge.com/en/news/295337674.md" description: "Bessent has employed three tactics to suppress long-term U.S. Treasury yields: joint intervention in the yen foreign exchange market, adjusting wording in quarterly refinancing announcements to hint at reducing long-term debt supply, and publicly endorsing Federal Reserve Chair Warsh. However, Wall Street is sharply divided on their effectiveness. Facing structural pressures such as a massive fiscal deficit, persistent inflation, and oil price shocks, the Treasury Department's room for maneuver is limited, casting doubt on the marginal efficacy of these measures. Ultimately, stabilizing the bond market depends on whether inflation can fall" datetime: "2026-08-09T23:59:17.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/295337674.md) - [en](https://longbridge.com/en/news/295337674.md) - [zh-HK](https://longbridge.com/zh-HK/news/295337674.md) --- # Can Bessent Still 'Stabilize' the Bond Market? U.S. Treasury Secretary Bessent is deploying every available tool in an attempt to curb the continued rise in long-term U.S. Treasury yields—but Wall Street remains sharply divided on whether these efforts will truly succeed. Over the past week, Bessent has taken successive actions: leading the first U.S. foreign exchange intervention in nearly three decades to support the yen, subtly adjusting language in the quarterly refinancing statement to hint at potential cuts to long-term debt supply, and publicly endorsing Federal Reserve Chair Warsh. According to Bloomberg, Wall Street traders and strategists generally interpret these moves as signals of Bessent’s intent to suppress rising long-term interest rates. These actions come against a backdrop where the 10-Year Treasury Yield has risen to approximately 4.65%, higher than the level at the start of Trump’s second term and approaching a 19-year high. The sustained rise in long-term rates is driving up financing costs for everyone from homebuyers to corporations. Meanwhile, an annual fiscal deficit of nearly $2 trillion, persistent inflationary pressures, and oil price shocks triggered by the war in Iran constitute structural challenges that Bessent cannot easily resolve alone. Priya Misra, a portfolio manager at J.P. Morgan Asset Management, stated, **“The Federal Reserve and the Treasury are inevitably concerned about the level of long-term interest rates,”** noting that Bessent’s series of actions signal to the market that **“they are aware of trends in the interest rate market and will not hesitate to use the various tools at their disposal.”** ## Three Moves: Intervening in the Yen, Adjusting Wording, and Backing Warsh **Bessent’s first move was intervention in the foreign exchange market.** The United States, in conjunction with Japan, bought yen, marking the first time since 1998 that the U.S. has participated in such an operation. According to Bloomberg, while this move ostensibly provides support to an ally, its deeper logic lies in alleviating pressure on Japan to sell U.S. Treasuries. Previously, the continuous weakening of the yen gave Japan the incentive to sell U.S. Treasury bonds to raise dollars for its own currency intervention. Additionally, Bessent pointed out that Japan could use the Federal Reserve’s Foreign and International Monetary Authorities (FIMA) Repo Facility in the future to borrow dollars, thereby reducing the need to directly sell off U.S. Treasuries. Peter Boockvar, Chief Investment Officer at Onepoint Bfg, was blunt: > “We have clearly reached a point where the U.S. Treasury market is so fragile that we are encouraging foreign holders not to sell.” **The second move was a subtle tweak in the wording of the quarterly refinancing statement.** An article from Wallstreetcn noted that on August 5, the U.S. Treasury changed its description of interest-bearing security auctions in the quarterly refinancing statement from considering “potential future increases” to “potential future changes.” This single-word difference immediately sparked widespread market interpretation. According to Bloomberg, a survey of BMO Capital Markets’ clients showed that 61% of respondents now expect the next adjustment to the size of 30-year Treasury auctions to be a reduction rather than an expansion. **The third move was a public endorsement of Warsh.** Following last month’s Federal Reserve meeting, Warsh triggered a bond market sell-off due to his failure to clearly articulate the path to lowering inflation. Reportedly, Bessent subsequently stated on CNBC that the market needed to “detox” from the Fed’s comments, expressing his belief that the Federal Reserve “will strike a balance between its growth mandate and its inflation mandate.” ## Can Wording Adjustments Truly Compress Long-Term Debt Supply? The Market Is Divided As noted in an article from Wallstreetcn, this wording adjustment has sparked a rare debate in the world’s largest bond market. Supporters argue the signal is clear. > Gennadiy Goldberg, Head of U.S. Rates Strategy at TD Securities, pointed out after the release of the quarterly refinancing statement that “this move hints at potential room for future cuts in long-end supply, helping to boost market sentiment for the long end of the curve.” > > TD Securities expects that the Treasury may reduce the auction sizes of 20-year and 30-year Treasuries in May, while increasing the issuance volume of 2- to 10-year notes. > > Guneet Dhingra, Head of U.S. Rates Strategy at BNP Paribas, also stated that “from a logical and analytical perspective, cuts do make sense,” listing it as “one of the few paths that can effectively lower yields.” However, skepticism is also significant. > Steven Zeng, a rates strategist at Deutsche Bank, stated that considering the U.S. government’s massive financing needs, reducing bond auction sizes is “not his base case scenario,” and that the Treasury’s wording adjustment is more about “deliberately suppressing negative market reactions to expectations of larger future auctions.” > > Michael Cloherty, Head of U.S. Rates Strategy at CIBC Capital Markets, took a harder line, stating outright that cutting coupon-bearing bonds of certain maturities is “not even up for discussion.” He pointed out that replacing long-term financing with expanded short-term borrowing would force short-end yields higher to attract a broader range of buyers, a logic with fundamental flaws. History shows that **adjustments to auction sizes have an impact on market psychology that cannot be ignored.** In 2023, the 30-year yield climbed to a high of nearly 5.18% in October. That November, the Treasury unexpectedly narrowed the incremental increase in auctions for the longest-maturity Treasuries, triggering a significant rebound in U.S. bonds, with the 30-year yield falling to slightly above 4% by the end of the year. However, **at that time, Bessent himself had criticized the Biden administration’s move as politically motivated—coming just before the 2024 election. Now, he faces the choice of whether to reenact the same script, and market interpretations of his motives are equally unavoidable.** Dhingra also warned that **if the Treasury releases signals gradually, it will dissipate policy effectiveness.** “By gradually laying the groundwork to guide market expectations for coupon bond cuts, they will lose the ‘shock’ effect seen in 2023.” ## Structural Pressures Are Hard to Resolve, Limited Room in the Toolkit The fundamental dilemma Bessent faces is that the forces driving long-term interest rates higher far exceed the Treasury’s regulatory capacity. According to Bloomberg, the Trump administration’s spending cuts have yielded little result, and tax cut policies will significantly increase government debt over the next decade. Trump’s renewed threat last week to dismiss Federal Reserve Governor Cook has heightened investor concerns about central bank independence. Meanwhile, oil price shocks triggered by the war in Iran have created new inflationary pressures. John Velis, U.S. Macro Strategist at BNY, stated bluntly: > “Given the fiscal policies already implemented and the war factors, it will be very difficult to alleviate pressure on the long end.” The size of the U.S. Treasury market has more than doubled since 2018, exceeding $31 trillion. An annual deficit of nearly $2 trillion means that the supply of new debt will continue to increase. In this context, Phoebe White, Head of U.S. Rates Strategy at UBS Group, offered a pertinent assessment: > The actual impact of the Treasury’s recent measures may be limited, but it indicates that “if the Treasury can do anything to stop long-term yields from rising further, it will use the tools at its disposal.” Analysts believe that ultimately, whether bondholders can truly be persuaded to lend at lower interest rates **still depends on whether inflation can genuinely fall back to the Federal Reserve’s 2% target—a target that has been exceeded for five consecutive years.** Bessent’s toolkit may not be small, but in the face of current structural pressures, its marginal efficacy is facing increasing skepticism. ### Related Stocks - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) - [BMO.US](https://longbridge.com/en/quote/BMO.US.md) - [TD.US](https://longbridge.com/en/quote/TD.US.md) - [BNPQY.US](https://longbridge.com/en/quote/BNPQY.US.md) - [DBK.DE](https://longbridge.com/en/quote/DBK.DE.md) - [DB.US](https://longbridge.com/en/quote/DB.US.md) - [CM.US](https://longbridge.com/en/quote/CM.US.md) - [BK.US](https://longbridge.com/en/quote/BK.US.md) - [UBS.US](https://longbridge.com/en/quote/UBS.US.md) - [JPM-M.US](https://longbridge.com/en/quote/JPM-M.US.md) - [JPM-C.US](https://longbridge.com/en/quote/JPM-C.US.md) - [JPM-D.US](https://longbridge.com/en/quote/JPM-D.US.md) - [JPM-L.US](https://longbridge.com/en/quote/JPM-L.US.md) - [8634.JP](https://longbridge.com/en/quote/8634.JP.md) - [JPM-K.US](https://longbridge.com/en/quote/JPM-K.US.md) - [JPM-J.US](https://longbridge.com/en/quote/JPM-J.US.md) - [03KB.DE](https://longbridge.com/en/quote/03KB.DE.md) - [DPB.DE](https://longbridge.com/en/quote/DPB.DE.md) - [BK-K.US](https://longbridge.com/en/quote/BK-K.US.md) ## Related News & Research - [Vector joins Unison, Horizon, Powerco, Our Energy to launch New Zealand local flexibility market Localflex](https://longbridge.com/en/news/295341941.md) - [Shaw and Partners Sticks to Their Buy Rating for CV Check Ltd (KYP)](https://longbridge.com/en/news/295338038.md) - [VibeIQ Raises $22.5 Million to Accelerate AI-Native Product Creation and Market Expansion](https://longbridge.com/en/news/295385416.md) - [The Federal Reserve Just Released Its August Inflation Forecast, and It Could Put the FOMC on a Collision Course for Its September Meeting](https://longbridge.com/en/news/295336456.md) - [Nvidia-Backed Lumentum Soaring Again: Will It Rise or Fall After Earnings?](https://longbridge.com/en/news/295343373.md)