Bessent’s Full-Scale Buyback Push... Yields Climb Again Amid $40 Trillion Debt (Comprehensive)

Possibility of Further Buyback Expansion Opens Up

30-Year Yield Rebounds Within a Day

40 Trillion Dollars in Debt and AI Funding Demand Add Pressure

Market Says "Structural Issues Remain Unresolved"

Scott Bessent, U.S. Secretary of the Treasury, once again emphasized his willingness to intervene in the market, saying that Treasury buybacks could be further expanded to curb soaring long-term Treasury yields. However, U.S. Treasury yields ultimately ended higher. Even after the Treasury announced it would more than double the scale of long-term Treasury buybacks and opened the door to further expansion, experts assess that such measures are limited in curbing structural factors that are pushing up long-term yields. These include the national debt exceeding 40 trillion dollars, massive fiscal deficits, and the overwhelming capital demand of corporations investing in artificial intelligence (AI).

Scott Bessent, U.S. Secretary of the Treasury. 2026.05.13. Photo by Dongju Yoon

On August 20 (local time), Secretary Bessent stated in a CNBC interview that the volume of future long-term Treasury buybacks could exceed 4 billion dollars per transaction. This came just one day after the Treasury announced it would expand the liquidity support buyback limit for 10- to 20-year and 20- to 30-year Treasury bonds from a maximum of 2 billion dollars per transaction to at least 4 billion dollars. Secretary Bessent thus emphasized the possibility of further expansion a day after the previous announcement.

Bessent stressed that the government has a "big toolkit" to respond to the surge in long-term yields. He also reaffirmed his view that recent long-term yields do not accurately reflect the fundamentals of the U.S. economy.

However, the reaction in the bond market was short-lived. Immediately after Secretary Bessent's remarks, Treasury yields fell temporarily but soon rebounded and ultimately ended higher than the previous day's close. According to the Wall Street Journal (WSJ), following the buyback expansion announcement a day earlier, the 30-year U.S. Treasury yield fell to the 5.19 percent range. But on this day, it rose back to around 5.24 percent. The 10-year yield also reversed its previous decline, climbing to the 4.69 percent range.

This contrasts with the immediate market reaction after the Treasury’s announcement the previous day. When the Treasury announced the buyback expansion, the yield on the 30-year bond plunged nearly 9 basis points (1bp = 0.01 percentage point) to 5.194 percent, and the 10-year yield also fell to 4.651 percent. However, much of this was reversed in just one day, raising questions about the sustained effectiveness of buybacks in curbing yields.

The WSJ assessed that the impact of Secretary Bessent’s market intervention was short-lived. While the Treasury’s buyback expansion briefly lowered yields, factors that drive rates higher—such as a swelling fiscal deficit and aggressive borrowing by tech firms—remain unresolved. Analysts at ING likened the Treasury’s response to “rearranging deck chairs on the Titanic.”

"Issuing Much More Than Purchased"...The Limits of Buybacks

The biggest limitation of buybacks is that even as the Treasury purchases long-term bonds, it must continue issuing far more Treasuries to the market. According to the Financial Times (FT), the Treasury plans to issue a total of 111 billion dollars in 20- and 30-year bonds this quarter. The Treasury initially planned to conduct four buybacks of 20- to 30-year bonds this quarter, each up to a maximum of 2 billion dollars, and the first transaction was executed on August 17.

Afterwards, the remaining buyback size was at least doubled, but the FT estimates that this move will only reduce the net issuance of 20- and 30-year bonds from about 103 billion dollars to 97 billion dollars. In other words, even with a significant increase in buybacks, the net reduction in long-term bond supply is at least 6 billion dollars. The FT evaluated this as a signal from the market that the Treasury’s measures alone are unlikely to dramatically alter supply-demand dynamics in the long-term bond market.

Ultimately, buybacks can improve trading conditions in the long-term bond market and temporarily reduce supply pressure, but they do not drastically cut the overall amount of Treasuries the U.S. government must issue. Especially with the fiscal deficit persisting, even with increased long-term buybacks, the government’s overall funding needs do not shrink, potentially leading to more issuance of bonds with other maturities.

40 Trillion Dollars in Debt...High Yields Worsen the Deficit Again

The most significant structural factor behind rising long-term yields, according to the market, is the U.S. fiscal situation. U.S. national debt recently surpassed 40 trillion dollars for the first time—a nearly twofold increase compared to the start of the first Trump administration.

The more pressing concern is that high long-term yields are in turn amplifying fiscal burdens. As maturing bonds are rolled over at higher rates, the interest costs the U.S. government must bear increase, further expanding the fiscal deficit. Widening deficits necessitate even more bond issuance, which can place additional upward pressure on long-term rates.

The FT also noted that the Trump administration’s budget projections are based on anticipated rate cuts by the Federal Reserve and a decline in Treasury yields. If long-term yields remain higher than expected, the government will have to continue refinancing debt at elevated interest costs, potentially worsening the fiscal outlook.

AI investment is another source of pressure. As technology companies increase bond issuance to fund large-scale infrastructure investments such as data centers and power grids, U.S. government bonds are now competing with corporate bonds for investors' capital. One foreign media outlet analyzed that the combination of high government deficits and massive capital demand for AI data center projects has played a major role in the recent rise of long-term yields.

The increase in international oil prices due to the war in Iran and concerns about inflation are also exerting upward pressure. If high inflation persists for an extended period, investors may demand higher yields in exchange for holding long-term bonds.

Foreign media outlets analyzed that, although the buyback announcement temporarily halted the rise in long-term yields, market anxiety persists due to ongoing concerns about inflation and ballooning government debt.

This content was produced with the assistance of AI translation services.