US stock market: Bessent dismisses US bond market turmoil concerns, points to economic strength

U.S. Treasury Secretary Scott Bessent has pushed back against concerns over turbulence in the U.S. government bond market, arguing that elevated yields and worries about rising debt do not reflect the underlying strength of the U.S. economy or its fiscal outlook, Reuters reported.

In an interview with Reuters on Sunday, Bessent said the performance of the U.S. Treasury market did not indicate significant investor unease. He maintained that the U.S. bond market had performed strongly compared with its global peers this year.

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Economic Growth Supports Fiscal Outlook
Bessent highlighted continued U.S. economic growth despite the country's large budget deficits, arguing that the combination of expansion and fiscal capacity puts the United States in a stronger position than several other advanced economies.

His comments came ahead of a two-day gathering of G20 finance leaders in Asheville, North Carolina, where global economic conditions, fiscal policy and financial-market stability are expected to feature prominently.

Benchmark U.S. Treasury yields were largely stable last week. The 10-year Treasury yield ended Friday near 4.73% after trading within a relatively narrow range as investors weighed concerns over the U.S. fiscal position against evidence of resilient economic growth.

Longer-term Treasury yields also remained broadly steady despite renewed U.S.-Iran tensions during Asian trading on Monday.

Iran Conflict Adds Inflation Pressure
Bessent attributed part of the recent rise in Treasury yields to higher energy prices and inflationary pressures linked to the conflict between the United States and Iran. He suggested that these pressures could diminish over time.

At the same time, the Treasury secretary argued that elevated yields also reflected investor confidence in the strength of the U.S. economy rather than solely concerns about government borrowing.

Treasury Bond Buybacks Under Scrutiny
Bessent also defended the Treasury's decision to expand its programme of bond buybacks, following criticism from some central bank policymakers that the move could interfere with normal market functioning.

Reuters reported that the Treasury plans to at least double the size of buybacks of longer-dated government debt to $4 billion per operation. The move follows a sharp rise in long-term borrowing costs, with the 30-year Treasury yield recently reaching a 19-year high.

Bessent has argued that the increase in long-term yields was not fully justified by economic fundamentals and that the buyback programme could help improve market functioning.

Larger Overseas Interventions Cited
Defending the Treasury's approach, Bessent pointed to much larger bond-market interventions previously undertaken by major central banks. He cited the European Central Bank under former President Mario Draghi and the Bank of Japan's extensive purchases of government bonds as examples of interventions that attracted less scrutiny.

The Treasury's own buyback programme is considerably smaller and is primarily designed to support market liquidity rather than provide broad monetary stimulus.

Larger Buybacks to Begin in September
The Treasury's decision to increase buybacks comes as the government seeks to reduce the risk of disorderly trading conditions in the world's largest government bond market.

Bessent said the programme was partly intended to address periods of thinner trading activity, particularly during August, when reduced market liquidity can amplify price movements.

Reuters reported that the larger buyback operations are scheduled to begin on September 10. Bessent said the Treasury's objective was not to dictate where Treasury yields should trade, but to help ensure that market movements remain orderly.

The comments come as investors continue to monitor the trajectory of U.S. government debt, long-term borrowing costs, inflation and the broader fiscal outlook. With Treasury yields elevated and government borrowing needs remaining substantial, the bond market is likely to remain a key focus for investors in the months ahead.