--- title: "Can Bessent Still \"Stabilize\" the Bond Market?" type: "News" locale: "en" url: "https://longbridge.com/en/news/295337806.md" description: "To curb the rise in long-term U.S. Treasury yields, U.S. Treasury Secretary Bessent has taken measures such as foreign exchange intervention to support the yen, adjusting refinancing wording to hint at reducing long-term debt supply, and publicly supporting the Federal Reserve Chair. Although the market interprets these moves as signals to suppress interest rates, Wall Street is clearly divided on the effectiveness of his policies in the face of huge deficits, inflation, and geopolitical pressures" datetime: "2026-08-10T00:00:40.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/295337806.md) - [en](https://longbridge.com/en/news/295337806.md) - [zh-HK](https://longbridge.com/zh-HK/news/295337806.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 is sharply divided on whether these efforts will truly succeed. Over the past week, Bessent has made a series of moves: leading the first U.S. foreign exchange intervention in nearly three decades to support the yen, subtly adjusting the wording in the quarterly refinancing statement to hint at a potential reduction in long-term debt supply, and publicly endorsing Federal Reserve Chair Warsh. According to Bloomberg, Wall Street traders and strategists generally interpret these actions as signals that Bessent intends to suppress the upward trend in long-term interest rates. These moves come against the backdrop of the 10-Year Treasury Yield rising to approximately 4.65%, higher than the level at the start of Trump's second term and approaching a 19-year high. The persistent rise in long-term interest rates is driving up financing costs for everyone from homebuyers to corporations. Meanwhile, structural pressures—including an annual fiscal deficit of nearly $2 trillion, ongoing inflationary pressures, and oil price shocks triggered by the war in Iran—constitute 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 the 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 Escorting Warsh **Bessent's first move was intervention in the foreign exchange market.** The United States, jointly 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 aims to support an ally, its underlying logic is to alleviate the pressure on Japan to sell U.S. Treasuries. Previously, the continuous weakening of the yen gave Japan the motive to sell U.S. Treasury bonds to raise dollars for its own intervention in the currency market. 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 obviously 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 adjustment of wording in the quarterly refinancing statement.** An article by Wallstreetcn noted that on August 5, the U.S. Treasury Department changed the description of interest-bearing securities auctions in its quarterly refinancing statement from considering "potential future increases" to "potential future changes." This slight change in wording 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 30-year Treasury auction size to be a reduction rather than an expansion. **The third move was a public endorsement of Warsh.** After 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 An article by Wallstreetcn noted that this wording adjustment has sparked a rare debate in the world's largest bond market. Supporters believe the signal is clear. > Gennadiy Goldberg, Head of U.S. Interest Rate Strategy at TD Securities, pointed out after the release of the quarterly refinancing statement, "This move hints at potential room for future cuts in long-end supply, which helps 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-year to 10-year notes. > > Guneet Dhingra, Head of U.S. Interest Rate Strategy at BNP Paribas, also stated, "From a logical and analytical perspective, cutting does have its rationale," listing it as "one of the few paths that can effectively push down yields." However, skepticism is also significant. > Steven Zeng, an interest rate 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 the market's negative expected reaction to larger future auction sizes." > > Michael Cloherty, Head of U.S. Interest Rate Strategy at CIBC Capital Markets, took a harder stance, stating outright that cutting coupon bonds for 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 once 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. Treasuries, with the 30-year yield falling back 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 the market's interpretation of his motives is equally unavoidable.** Dhingra also warned that **if the Treasury releases signals gradually, it will instead dissipate policy effectiveness.** "By gradually paving the way 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 Toolbox 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 cut measures have had little effect, and tax cut policies will significantly increase government debt over the next decade. Last week, Trump reiterated his threat to dismiss Federal Reserve Governor Cook, heightening investor concerns about central bank independence. The oil price shock triggered by the war in Iran has 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 long-end pressures." 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. Interest Rate 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 toolbox may not be small, but in the face of current structural pressures, its marginal effectiveness is being increasingly questioned. Risk Warning and Disclaimer The market carries risks; investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. 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