Bonds to Bessent: Challenge Accepted

When the Yellen Treasury rolled out the buyback program in 2023/2024, they were careful to refer to it as strictly focused on liquidity and cash management. If they were secretly interested in influencing the yield curve, we'd never know. Contrast that to Bessent who specifically told reporters that long term rates were too high and that there was a "signaling component" to the recent decision to increase buybacks. Rhetoric ramped up further this morning when he said "I am the house now," and "you can bet against me if you want." The bond market's responded with a hearty "challenge accepted." Treasury announced a $6bln long-end buyback, which was apparently not quite the bazooka that traders were positioned for. Bonds tanked immediately with 10yr yields hitting new long-term highs just under 4.86% before settling near 4.83%. Despite the apparent drama, this is a small deal in the big picture--especially in light of today's sharply higher oil prices which likely already would have been pushing yields higher if traders weren't waiting on the buyback announcement.