US Treasury Secretary Scott Bessent on Tuesday played down the most recent bond-market sell-off as worries mount over rising debt levels and energy-driven inflationary pressures.
“The US bond market has been the best performing bond market. What happens over a month doesn't matter,” he said during a fireside chat at the G20 finance gathering in North Carolina.
US Treasury yields were little changed on Tuesday after renewed strikes in the Middle East. The yield on the 10-year Treasury rose 3 basis points to 4.788 per cent, while the yield on the 30-year Treasury note rose 1 basis point to 5.259 per cent.
Mr Bessent said US bond markets show inflation expectations are “low to down”. “This is a growth story,” he said.
Federal Reserve Chairman Kevin Warsh on Monday told the G20 conference that he looked forward to learning more about other countries' growth prospects. He said the global economy was moving into a period of “secular growth” after experiencing a “global savings glut”.
The Treasury Department moved to steady US bond markets by announcing it would at least double the size of its government debt repurchases. The department also said it would increase the size of its 10-20-year and 20-30-year options from $2 billion to $4 billion, with the change coming into effect on September 9 and running to November 4.
The plan was criticised by US investor and Mr Bessent's mentor Stanley Druckenmiller, who, in an op-ed for the Wall Street Journal, called the move “a mistake far larger than $4 billion suggests”.
The article, published last week, noted that while the Treasury's move sent bond yields lower, they rebounded the following day.
“You can’t buy your way out of a solvency conversation with liquidity tools,” Mr Druckenmiller wrote. “You can only postpone the conversation and raise the eventual price.”
Mr Bessent pushed back against that criticism in an interview with CNBC on Monday, saying US bonds had been flat since President Donald Trump entered office.
A global sell-off intensified on Tuesday after Japan's 10-year bond hit 3 per cent for the first time since 1996. The US and Japan agreed to a rare co-ordination to help stabilise the yen in late July.
Yields on the UK 10-year government bonds, known as Gilts, reached their highest level since 2008 while the UK 30-year Gilt hit its highest level since March 1998. The global bond rout also sent Germany's 30-year Bund to its highest level in 15 years, while France and Italy also saw rises.
Mr Bessent underscored the importance of close US-Japan co-ordination on shared macroeconomic priorities during a meeting with Bank of Japan Governor Kazuo Ueda on the sidelines of the G20 finance gathering, the Treasury said.
“The secretary emphasised the importance of sound formulation and communication of monetary policy to anchor inflation expectations and avoid excess exchange rate volatility,” the department said in a readout.
“Secretary Bessent also expressed strong support for Japan’s decisive market and monetary steps to address the substantial undervaluation of the yen and noted the role of yen weakness in contributing to domestic inflationary pressures in Japan.”
