The Trump administration’s attempts to stabilize financial markets fizzled on Thursday, leading Treasury Secretary Scott Bessent to suggest that a greater intervention may be on the way.
The Trump administration will announce plans in the coming days to potentially increase the $4 billion program to buy back government bonds from investors he first proposed yesterday, Bessent said Thursday.
The Trump administration’s initial plan to tamp down investor return rates didn’t work, with yields rebounding to uncomfortable highs on Thursday morning. The administration indicated it is planning to double down on the buyback program.
“We’re going to increase the size of the buyback,” Bessent said on CNBC on Thursday morning. “We believe that the yields don’t reflect the underlying fundamentals.”
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Bessent added that the Trump administration will soon announce an “increased focus on fiscal consolidation,” a debt- and budget-slashing effort that will involve President Donald Trump and Office of Management and Budget Director Russell Vought.
Elon Musk’s DOGE commission, which led to sweeping federal workforce reductions and put billions of dollars in grants on hold, failed to hit its debt-reduction targets. Inflationary pressures driving bond market volatility appear unlikely to subside as Trump ratchets up pressure on Iran and threatens the adversary with “economic warfare.”
Bessent attempted to assuage concerns about inflation on Thursday, saying the U.S. “will get on the other side” of the war in Iran and calling government expenditures on factories, equipment and farms an “investment in the future,” rather than government spending. He expressed optimism that tariff refunds winding down and an increase in the tax base will help balance the government’s costs and revenue.
“Think of it as pulling back the slingshot here. We have a lot of potential energy that will turn into kinetic energy during this year,” Bessent said, adding that “there’s a very good chance” the U.S. has already seen the peak that the federal deficit will reach during this administration.
Yields had cratered on Wednesday following the Treasury’s announcement of an expanded buyback operation, which will take billions of dollars of government debt off the market and free up capital for investors anxious about the government’s ability to repay.
That progress came undone Thursday morning. Yields neared or exceeded the high bond rates that have plagued markets over the past several weeks and sparked fears of an approaching crisis. High yields mean higher borrowing costs for everyday Americans and businesses.
Economists expressed skepticism that the Treasury’s buyback tactic will solve the big-picture issues in the bond market, including inflationary pressures from Trump’s war in Iran and trade policy, as well as the rapid buildout of artificial intelligence.
“The market was perhaps reacting yesterday positively to signs that certain markets are going to have more liquidity, but today the markets have incorporated information and understand the long-term drivers of bond prices and yields have not changed,” said Judge Glock, the research director at the conservative Manhattan Institute.
“Absent some incredible change at the Federal Reserve or absent some incredible change in Congress that actually starts to reduce the federal deficit, those longer-term drivers likely will not change,” Glock added.
Economists who spoke with NOTUS on Thursday said an increased buyback program is not going to meet the bar for tempering the market’s volatility.
“If we’re talking about kind of more permanently anchoring and lowering long-term bond yields, I think it’s going to be quite ineffective,” said Alex Jacquez, a senior vice president at the left-leaning Groundwork Collaborative. “The market is incredibly right to be worried about what the president is going to do day-to-day.”
Jared Bernstein, a senior fellow at the left-leaning Center for American Progress who served as President Joe Biden’s chief economic adviser, said before Bessent’s Thursday remarks that an increased buyback “will do more harm than good, will smack of desperation, and will spook markets.”
The Treasury’s buyback announcement is nothing new. The Treasury has bought back more than $171 billion in various U.S. securities, which allow investors to buy government debt, this year alone, according to a NOTUS review of Treasury data.
“It’s really a minor drop in the bucket in the overall scale of Treasury debt,” Oxford Economics lead analyst John Canavan said.
However, the U.S.’s fiscal issues are deepening as the bond market grows increasingly unruly for the Trump administration. The national debt surpassed $40 trillion for the first time on Wednesday.
“There’s nothing magic about the 40 trillion number, and we can grow our way out of that,” Bessent said.
The 30-year U.S. Treasury bonds dipped more than 10 basis points to as low as 5.183% in the hours after Bessent’s announcement Wednesday. It recovered 7 basis points at its highest point Thursday morning.
Yields over the past month have surpassed those during the 2007 financial crisis, leading Trump to blame high interest rates. The president has repeatedly called for the Fed to slash rates and pressured the previous Fed chair, Jerome Powell to get it done.
“We have interest rates that are artificially — they’re actually artificially high,” Trump told reporters Wednesday. “They raise them for no reason, and you can’t go out to the market when you have a Fed that’s raising interest. You can’t say, ‘I want to pay 3 points less than what the Fed says you’re supposed to be paying.’”
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