The time Scott Bessent tried to outsmart the bond market

Bond-market pressure challenges Bessent’s strategy on interest rates

Healfromzero.com – Scott Bessent entered the Trump administration last year with a long record in global markets, strong standing on Wall Street and a distinctly confident public style. As Treasury secretary and President Donald Trump’s leading economic representative, he has sought to project control over the forces shaping borrowing costs across the United States.

That effort has run into a formidable obstacle: the Treasury bond market. The market for US government debt is central to global finance, and its movements affect everything from federal borrowing costs to home loans and small-business credit.

Bessent had set an early objective of bringing the benchmark 10-year Treasury yield below 4%. Instead, yields moved in the opposite direction. On Tuesday, the 10-year rate briefly rose above 5.04%, its highest point since 2007.

Higher Treasury yields carry immediate consequences for households and businesses. Mortgage rates tend to move closely with the 10-year Treasury yield, and mortgage borrowing costs are now at their highest level since June 2025. Rising yields can also make loans more expensive for smaller companies and increase the cost for Washington to finance its debt.

A high-profile effort to calm yields

When borrowing costs climbed sharply last month, Bessent authorized a move that surprised many market participants: Treasury buybacks were ultimately tripled. The intervention was intended to ease pressure in the bond market, but it has drawn criticism because yields stand higher than they were before the action.

“It massively flopped,” Hardika Singh, an economic strategist at Fundstrat, said earlier this month.

“If anything, this may have made the problem worse. Bessent showed his hand. To investors, it was like, ‘Oh my gosh, he’s worried.’ We should be too.”

Tim Mahedy, chief executive of Access/Macro and a former official at both the Federal Reserve Bank of San Francisco and the International Monetary Fund, argued that the result ran counter to Bessent’s stated goal.

“The data is clear. He’s added accelerant to the fire. He’s had the exact opposite impact that he wanted,” Mahedy said.

The episode has put renewed focus on the limits of policy efforts aimed at influencing market rates without changing the fiscal conditions investors weigh when they buy government debt.

Deficits remain the larger concern

Douglas Holtz-Eakin, who served as a senior economist under President George W. Bush and now leads the center-right American Action Forum, said the central issue is the outlook for deficits measured in the trillions of dollars.

“I don’t think you can fool mother nature. You’ve got to fix the fundamentals,” Holtz-Eakin said.

He described the attempt to manage yields as destined to fall short because it did not directly address the underlying budget picture. The United States carried substantial debt before Bessent became Treasury secretary, and responsibility for the fiscal situation extends across both political parties.

Still, Trump and Bessent had pledged to reduce the federal deficit to 3% of gross domestic product. Deficits are instead running at roughly double that rate, even with low unemployment and White House claims that the economy remains strong.

“They’ve made it worse. There’s no way around that,” Holtz-Eakin said.

David Wessel, a senior fellow in economic studies at the Brookings Institution, said a bond-market intervention of this kind would be more plausible if trading itself were seriously impaired and if policymakers followed through with measures to improve the federal budget.

“But this isn’t a market-functioning-style emergency. It’s a politically inconvenient increase in yields,” Wessel said.

Political pressure meets market realities

Bessent’s forceful approach reflects a career marked by high-stakes financial bets. He helped George Soros profit from a major short position against the British pound in 1992, a trade that contributed to the United Kingdom abandoning its attempt to support the currency and generated more than $1 billion for Soros.

More recently, Bessent has challenged critics with the declaration, “I am the house now,” while dismissing objections from what he called “some of the Bloomberg Terminal bros.” His public message has been that Treasury can help reduce the cost of money by pushing yields lower.

But Treasury officials operate within a broader economic and political environment. Bessent has also had to defend policies pursued by Trump that critics view as disruptive or inflationary. Last year’s global trade conflict unsettled the bond market and reversed progress on inflation. Bessent was credited with persuading Trump to pause the worldwide tariffs last spring, an action that prompted a powerful rally in bonds and stocks.

This year, the military conflict with Iran has added to cost-of-living concerns and market uncertainty. Mahedy characterized the challenge bluntly.

“He’s been taken for a ride by Trump’s chaos policy,” Mahedy said.

The larger lesson for borrowers is straightforward: bond yields are not an abstract market measure. When they rise, the effects can spread from federal finances to family budgets, housing affordability and business investment. Bessent’s campaign to lower yields has made those stakes more visible, while leaving the administration under pressure to show that its economic strategy can address the fiscal and inflation concerns driving investors’ decisions.