U.S. Treasury Secretary: Investors Not Worried About U.S. Debt Credit
U.S. Treasury Secretary Scott Bessent stated in an interview with Reuters at the end of August that investors are not panicking about U.S. credit, saying, "I'm not sure where this so-called turmoil in the bond market is." He noted that the U.S. Treasury market has been one of the best-performing bond markets globally this year.
This statement comes amid ongoing concerns about the rising U.S. debt: the total federal debt has surpassed $40 trillion, doubling in ten years; the Congressional Budget Office predicts that by fiscal year 2026, U.S. net interest payments will reach about $1 trillion; the yield on the 10-year U.S. Treasury bond remains around 4.73%, with the 30-year yield briefly reaching its highest level in 19 years.
Bessent's comments followed signals from Federal Reserve Chairman Kevin Warsh at the Jackson Hole meeting regarding potential further interest rate hikes. He responded to concerns about U.S. debt with economic growth data: U.S. real GDP grew at an annual rate of 1.5% in the second quarter, down from 2.1% in the first quarter, with consumption, investment, and exports all contributing to growth. He argued that rising yields reflect economic confidence rather than market panic.
To stabilize the long-end Treasury market, the Treasury has increased the scale of its bond repurchase operations to $4 billion each time and indicated in August that it may further expand this to over $4 billion; a new round of expanded repurchase operations is set to start on September 10. Bessent likened this move to larger-scale market interventions by the European Central Bank and the Bank of Japan, emphasizing that he is preventing disorderly market fluctuations rather than trying to artificially lower yields or reverse market pricing.
Several institutions are cautious about the effectiveness of the repurchase operations, believing their actual impact on lowering long-end yields is limited; some on Wall Street worry that the Treasury's frequent interventions in the scale and intensity of repurchases may actually amplify market concerns about the supply-demand imbalance in U.S. debt, seen as a well-intentioned but questionable intervention.
The core contradiction in this statement and operation lies in the differing interpretations of the causes of "high yields" between the Treasury and some investors: the Treasury attributes high yields to the funding needs arising from strong economic growth, attempting to counter external concerns about U.S. fiscal sustainability with a growth narrative; some funds in the bond market are more focused on the continuous expansion of U.S. debt supply and the rising net interest payments themselves pushing up credit premiums, leaning towards demanding higher yields as compensation. By expanding repurchases, the Treasury is signaling liquidity support to the market, which may benefit long-end Treasury prices and related interest-sensitive assets in the short term, but if yields remain high due to supply pressures, the rising financing cost will ultimately still be transmitted to federal finances, as well as to areas relying on long-term interest rate pricing such as mortgages and corporate bond issuance.
Source: Public Information
ABAB AI Insight
Since taking office as Treasury Secretary in 2025, Bessent has repeatedly downplayed market concerns about U.S. debt through public interviews; previously, during the bond yield sell-off in January 2026, he also publicly stated he was not worried about yield fluctuations. He has compared the performance of the U.S. Treasury market in the first half of 2026 with that of European and Japanese bond markets to demonstrate the relative resilience of U.S. debt. This repeated communication strategy of using "horizontal comparisons" rather than directly addressing supply pressures is a consistent approach he has taken to respond to market skepticism during his tenure.
The core tool in the Treasury's current response is bond repurchases—buying back less liquid old bonds from the market with cash to inject short-term liquidity and lower term premiums, rather than reducing the scale of new bond issuance; this means that the cash flow is directed from the Treasury to holders of old bonds in the market, essentially using short-term operations to alleviate long-end liquidity tensions, rather than addressing the fundamental supply issues of a $40 trillion debt stock and trillion-dollar net interest payments. The increase in repurchase scale and plans for further expansion indicate that the Treasury prefers to double down on the same tool rather than switch to new tools when yield pressures persist.
This is similar to the logic of the Federal Reserve being forced to restart repurchase operations in 2019 when liquidity tensions arose in the repo market, where authorities sought to stabilize market functions without being interpreted as "restarting quantitative easing"; the difference is that in 2019, it was led by the central bank, while this time the Treasury is taking on some functions traditionally associated with the central bank's market stabilization role. The current U.S. Treasury market is in a phase of continuous supply expansion and forced elevation of term premiums, with both fiscal communication and market-based tools working simultaneously to compete for pricing power.
This is essentially a game regarding the transfer of pricing power in U.S. debt—historically, U.S. Treasury yields have been primarily determined by economic growth and monetary policy expectations, but as federal debt and net interest payment scales reach current levels, the supply side (bond issuance scale, repurchase intensity) itself begins to become an independent variable affecting the shape of the yield curve. The Treasury is attempting to pull pricing power back into the "economically driven" framework through repurchase operations and growth narratives, while some funds in the market insist on factoring in U.S. debt supply risks into yields; the outcome of this tug-of-war will determine whether future U.S. Treasury term premiums are priced based on fundamentals or based on the debt volume itself.
ABAB News · Law of Cognition
- When officials say not to worry, the market is often calculating this account.
- The interest on debt will eventually speak for itself.
- When tools for stabilizing the market are used for too long, they will become the focus of market attention.