Bessent Attacks Treasury Shorts, Moderna Surges on Positive Phase III Trial Data

Bessent Attacks Treasury Shorts

Amid all the news this week about how the 30-year bond yield was hitting new 19-year highs, there was precious little commentary on how thin the market is.

Scott Bessent is obviously well aware of that fact. He stepped in today to double the buyback.

The purchases will be concentrated in the 10-year through 30-year maturities.

There have been several occasions when the US Treasury talked about retiring the 30-year.

The failure to issue in size at very long durations, during the decade of ultra-low rates, will be discussed for decades.

When that opportunity was passed up, the rationale for continuing to issue at the very long end of the yield curve makes little sense today.

The vast majority of investors are concerned with the fiscal condition of the US government. There seems to be no plan for narrowing the deficit.

All of the talk about outsized growth only works if spending is held steady. That is not happening.

At the same time, credit issuance to fund the AI buildout is competing for capital with the Treasury.

The effort to support the 30-year yield by hitting short positions was well timed.

The futures price is bouncing from the lower side of the 3-year range and the yield is testing the 2002 peak.

Upside follow through will be required to confirm a low of more than very short-term significance.

There is a good chance of that occurring, considering the extent of short positions currently under pressure.

However, to break the downtrend, there will need to be some progress on getting spending under control and that is still a distant possibility.

The good news is that the Treasury is willing to do something to support the bond market.

The bad news is the answer to where the money came from? The USA is heavily dependent on the very short end of the yield curve for funding.

If they are reducing the availability of long-term bonds, they are also enhancing their ability to monetise the debt. Buybacks are effectively a form of quantitative easing on a small scale. That suggests the tool is still the go-to for market manipulation.