Bessent signals push to cap long-term US yields, Bloomberg says

A series of recent moves by US Treasury Secretary Scott Bessent — from backing joint yen-support intervention to hinting at cuts in long-term bond issuance and publicly defending Federal Reserve Chair Kevin Warsh — all point in the same direction, analysts say: a concerted effort to keep long-term US Treasury yields from rising further.

Bloomberg reported Sunday that a growing number of Wall Street traders and market strategists believe Bessent and the Treasury are working to suppress long-term interest rates.

Bloomberg cited the recent joint US-Japan foreign-exchange intervention to support the yen as its first example. The move was seen as an attempt to head off a scenario in which Japan, defending the yen, would dump large holdings of US Treasuries — a sell-off that could push long-term yields even higher.

Bessent has said he supports expanding the Federal Reserve's Foreign and International Monetary Authorities repo facility limit, which would allow Japan to raise the dollars needed for market intervention without selling US Treasuries.

Bloomberg also noted a subtle but telling shift in the Treasury's latest bond-issuance plans.

In last week's quarterly refunding statement, the Treasury replaced its previous language about "potential future increases" in issuance with the phrase "potential future changes" — a shift the market read as leaving the door open to reducing long-term bond supply.

When bond supply falls, prices rise and yields drop. Cutting long-term issuance could therefore help ease the recent surge in long-term rates.

The 30-year Treasury yield surged to 5.28 percent on July 31, its highest level since 2007. Rising long-term rates push up mortgage costs and corporate borrowing expenses — a political liability for the Trump administration ahead of the November midterm elections.

Bessent's recent public defense of Warsh is read in the same light.

Warsh drew market disappointment at last month's FOMC press conference by reaffirming the Fed's price-stability mandate while offering no concrete guidance on the future policy path — a response that sent long-term yields sharply higher.

In a CNBC interview on Aug. 5, Bessent pushed back, arguing that markets needed to go through a "detox" from Fed communications and offering a strong defense of Warsh.

Still, some in the market question whether Treasury's efforts alone can hold long-term yields in check.

"It looks like they're signaling to foreign investors not to sell Treasuries at a time when the US bond market has become increasingly vulnerable," said Peter Boockvar, chief investment officer at Bleakley Financial Group.

Phoebe White, head of US rates strategy at UBS, also said the market impact of Treasury's measures could be limited. Even so, she added, "it clearly shows that the Treasury is willing to use every tool available to prevent long-term yields from rising further."