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Bessent’s move to tamp down rising rates backfires as bond yields jump, stocks tumble
Developing
In Short: Treasury Secretary Scott Bessent's attempt to cool rising bond yields backfired, with yields surging to their highest levels in months and stocks falling.
Bessent's latest effort to tamp down market 'fever' backfired as bond yields jumped and stocks tumbled on Wednesday.
The Treasury Department announced it would repurchase $6 billion worth of 10- to 20-year government bonds, hoping to drive up demand and push down yields.
However, the move instead caused most Treasury yields to sharply increase, with the 10-year bond yield reaching its highest level since November 2023.
The Nasdaq Composite, sensitive to interest rates, was down 0.8% at midday, reflecting the market's reaction to the failed attempt to control bond yields.
The reaction underscores the limits of Bessent's power over markets, which are influenced by factors such as inflation and trade policies.
What's still developing
- It also comes as the Trump administration is running out of tools to gain leverage over major parts of the U.S. economy, from gas prices and bond yields to retaliatory tariffs.
- Yields have been rising steadily since the start of the year.
- “Once markets believe Treasury is defending a price, every rise in yields becomes a test of official resolve, and the operations must grow to survive the tests,” wrote legendary investor Stanley Druckenmiller in a widely read Wall Street Journal op-ed in August.
- “The U.S. bond market has been the best performing bond market in the world since President Trump came in,” he said at an event at Southern Methodist University.
- That spooked bond markets, which saw inflation climbing as the Iran war dragged on and Trump’s trade policies raised the prices of many imported goods.
Sources
- NBC Newslink