Scott Bessent, the US treasury secretary, claimed the government’s massive buyback of US bonds was a success.
The claim came as the 10-year treasury yield reached a 19-year high on Tuesday, increasing pressure on interest rates as the Federal Reserve weighs another hike to see off rising inflation.
US treasury yields, or the rate of return that investors receive when a bond matures, underpins the rates of other loans such as mortgage, car payments and credit card debt. On Tuesday, the yield rate for the 10-year treasury reached 5.041%, the highest level since 2007.
The treasury yield rises when demand for bonds goes down. Though the US bond market is typically seen as one of the safest investment vehicles, investors have been wary of the effect the war in Iran is having on energy prices. Brent crude, the global benchmark for oil prices, hit $108 a barrel last week for the first time since May.
When bond yields started to rise in August, the US treasury announced it would triple its buyback of government debt, going from $2bn to $6bn in an effort to bring down bond yields.
Though the yields have continued to rise since, Bessent told Congress on Tuesday the operations are “the two most successful treasury auctions that we’ve had in 20 years”.
“Since President Trump has come in, (the US bond market) has been the best-performing bond market in the developing world,” Bessent said.
Earlier in August, the US government also stepped in to prop up the Japanese yen, a move that was seen as an effort to protect the Japanese government, a major holder of US bonds. Bessent told Congress the effort was a way for the US to signal support for Japanese policies.
The Trump administration has been doing its best to fight against growing concerns over high inflation as the war in Iran continues, which is expected to have a major effect on the upcoming midterm election. US inflation has soared over the summer, reaching a three-year high of 4.2% in May before coming down to 3.4% in July and August.
Stubbornly high prices set up a tough decision for the US Federal Reserve, which will on Wednesday announce any changes to the interest rate. The central bank is largely expected to raise rates for the first time since July 2023, which could help mitigate prices, though Donald Trump has demanded rates to be lowered.
