The bond market has signalled to Treasury Secretary Bessent that it will not
ignore the roughly $40 trillion stock of U.S. Treasuries. Bessent announced
plans to increase long-dated Treasury buybacks this fall, pledged to use the
Treasury’s wide “toolbox” to support markets and said further measures to curb
the rising U.S. debt burden are forthcoming. John Arnold, ex-Enron energy trader
and founder of Arnold Ventures, said this summer’s bond volatility may prove
another quickly contained episode, but his larger worry is that an unchanged
U.S. fiscal trajectory could persist until it triggers a crisis. Tracy Chen,
portfolio manager at Brandywine Global, said she is very nervous because Bessent
has failed to rein in long-term yields; market moves suggest bond vigilantes
still distrust him. Bessent needs to do more to convince investors the Trump
administration is serious about fiscal repair, but proposals to raise revenue
via tax increases or austerity would be politically unpopular ahead of the
November midterms.
