U.S. Treasury Secretary Scott Bessent said the recent rise in Treasury yields stems from global issues, a diagnosis that differs from his stance just two weeks ago, when he argued that higher long-term rates reflected accelerating U.S. economic growth and investor confidence. Even as Bessent has repeatedly intervened to calm markets, yields have shown little sign of retreating, and market participants say confidence in him is beginning to crack.
Speaking to reporters on the 15th before a hearing of the House Financial Services Committee, Bessent said the recent climb in Treasury yields originated from "global issues," according to Reuters. He appeared to be referring to higher oil prices tied to the war in Iran and a parallel surge in sovereign bond yields in major economies. At the hearing, Bessent addressed fiscal problems more directly, saying the rise in the 10-year Treasury yield reflected, among other factors, "the need to address the fiscal deficit."
His remarks marked a shift in tone from his earlier explanations. In an interview with Reuters on the 30th of last month, he pushed back against reading rising yields as a sign of market distrust in U.S. public finances. At the time, he said he was not sure where the turmoil in the bond market was supposed to be, adding that the U.S. bond market had posted the best performance among major economies this year.
At a Group of 20 finance ministers' meeting on the 1st of this month, he also argued that a breakdown of the components of Treasury yields showed inflation expectations flat or falling. It was a story about growth, he said, adding that he believed economic growth was accelerating again. His reading was that expectations for U.S. growth and expanding artificial intelligence investment, rather than inflation worries or deteriorating public finances, were pushing real rates higher.
Market analysts point to higher oil prices from the war in Iran, expectations that the Federal Reserve will raise its policy rate, competition for funding driven by expanding AI investment, and U.S. national debt that has passed $40 trillion as the forces lifting long-term rates. The 10-year Treasury yield briefly topped 5.04% on the same day, its highest level since 2007.
Bessent also gave himself credit for the Treasury Department's steps to stabilize the government bond market. Yields continued to rise even after the department nearly tripled the size of its long-dated Treasury buybacks from its original plan. His argument is that yields would have risen far more without the buybacks. At the hearing, he said there was a scenario for what would have happened had the department not acted, and stressed that the U.S. bond market had delivered the best performance among developed economies since President Donald Trump took office.
Still, concerns are growing in the market that Bessent's market-moving comments could erode confidence in policy. Financial Times columnist Edward Luce wrote that Bessent had warned that he was the "house" running the table in the foreign exchange market and that nobody should bet against him, but that the bond market bet against him and Bessent lost, asking how much weight traders would place on his next remarks.
Separately, Bessent said he would meet Chinese Vice Premier He Lifeng this weekend to coordinate the agenda for a U.S.-China summit, and that he planned to discuss U.S. financial sanctions on Iran as a major item. "We have sanctioned three banks in Russia and elsewhere. We have had very good private discussions with China, and I expect those discussions to continue when I meet my Chinese counterpart, Vice Premier He, this weekend," he said.
