By David Lawder and Leika Kihara
ASHEVILLE, North Carolina, Aug 30 (Reuters) – U.S. Treasury Secretary Scott Bessent brushed aside concerns about turbulence in the U.S. government bond market, arguing that worries about rising debt and yields overlook the strength of the U.S. economy and its fiscal outlook.
In an interview with Reuters on Sunday, Bessent pushed back against mounting scrutiny of U.S. debt levels and criticism of the Treasury’s efforts to manage market volatility, saying the market’s performance contradicted claims of investor unease.
“First of all, I’m not sure where the bond market turmoil is,” Bessent said, arguing that the U.S. bond market was “the best performing” among global peers this year.
Bessent also said the United States was in a stronger position than many advanced economies because it continues to grow even while running large budget deficits.
“What’s important, too, is that we are growing,” he said ahead of the Group of 20 finance leaders’ two-day gathering that kicks off on Monday in Asheville, North Carolina.
Benchmark U.S. Treasury yields were little changed over the past week, with the 10-year note ending Friday near 4.73% after hugging a tight range, as investors balanced concerns over the U.S. fiscal outlook against signs of resilient growth.
Long-end yields were little changed despite renewed attacks between the U.S. and Iran in Asian trade on Monday.
Bessent said yields had been pushed higher by energy prices and inflationary pressures stemming from the Iran conflict, factors he expects to fade over time. He added that higher yields reflected confidence in the U.S. economy.
Bessent also brushed aside concern voiced by some central bank policymakers over the U.S. Treasury’s surprise decision to increase bond buybacks, rejecting suggestions that the move distorted markets or broke with the Treasury market’s tradition of predictable operations.
Last week, Bessent said the U.S. Treasury would at least double the size of buybacks of longer-dated debt to $4 billion per operation, arguing the surge in yields that pushed 30-year borrowing costs to a 19-year high was disconnected from economic fundamentals.
Drawing parallels with far larger interventions abroad, Bessent said European Central Bank policies under former President Mario Draghi and years of aggressive bond purchases by the Bank of Japan faced less criticism.
“They didn’t seem to have a problem when Mario Draghi did it in Europe,” he said. “They didn’t seem to have a problem when the Japanese bought up half their bond market.”
The U.S. Treasury’s announcement of a much smaller program of regular debt repurchases was aimed at taming market volatility, which tends to increase in August when trading volume is thin, Bessent said. He noted that the department had yet to execute the larger buybacks, which start September 10.
“I don’t think I can change the equilibrium price,” he said. “My job is to slow things down … and make sure that the market doesn’t get disorderly.”
(Reporting by David Lawder and Leika KiharaEditing by Shri Navaratnam)
Comments