Scott Bessent targets bond market reform after criticizing predecessor’s approach

Treasury Secretary Scott Bessent spent months telling anyone who would listen that his predecessor got the bond market wrong. Then he tried to fix it himself, armed with a buyback bazooka and a CNBC appearance.

On August 19, Bessent announced the Treasury would at least double its buyback program for long-dated bonds, raising the maximum from $2 billion to $4 billion per operation. The frequency of these operations will also ramp up starting September 9 and continue through November.

The problem Bessent inherited

The US government’s gross federal debt now exceeds $40 trillion. The Treasury market itself is valued at roughly $32 trillion, making it the single most important fixed-income market on the planet and, arguably, the foundation of the entire global financial system.

Long-term yields climbed to a 19-year high before Bessent’s announcement, driven by a trio of forces that refused to cooperate with Washington’s fiscal ambitions. Persistent inflationary pressures kept the Federal Reserve from offering much relief. Heavy corporate borrowing to finance the AI infrastructure buildout sucked up capital that might otherwise have flowed into Treasuries. And geopolitical tensions tied to the conflict with Iran added a risk premium that investors demanded for parking money in longer-duration bonds.

The day after the buyback announcement, Bessent appeared on CNBC to make the case that the market was mispricing reality.

“Yields don’t reflect the underlying fundamentals,” Bessent said on August 20.

What the buyback plan actually does

Bond buybacks work like reverse auctions. The Treasury purchases its own outstanding bonds from the secondary market, injecting cash into the system and reducing the supply of those specific securities. When supply drops, prices rise, and yields fall.

By doubling the per-operation cap to $4 billion and running more frequent operations from September through November, Bessent is betting that a concentrated burst of demand from the government itself can push long-term yields back down to levels he considers more appropriate.

The initial market reaction was encouraging. Yields pulled back in the immediate aftermath of the announcement. But by late August, the 10-year Treasury yield had settled around 4.7% after only a partial reversal of the selloff.

Buybacks reduce the supply of outstanding bonds, but they do not reduce the government’s need to borrow. The Treasury still has to fund a deficit that continues to grow. So while one hand is buying back bonds to lower yields, the other hand is issuing new ones to pay the bills.

The Yellen comparison

Bessent’s criticism of his predecessor, former Treasury Secretary Janet Yellen, centered on how the department managed its issuance strategy. Yellen faced her own challenges with rising yields and made adjustments to the mix of short-term and long-term debt the Treasury sold. Bessent argued those efforts were inadequate or misguided.

Now in the driver’s seat, Bessent has opted for a more interventionist playbook. Rather than simply adjusting the composition of new issuance, he is actively entering the secondary market to buy back existing debt.

What to watch from here

The September 9 start date for the expanded buyback schedule marks the real test. Markets will be watching whether the increased frequency and size of operations can sustain downward pressure on yields, or whether the effect fades as traders adjust their positioning.

Analysts have flagged a deeper concern: the buyback program treats symptoms rather than causes. The fundamental driver of higher yields is the sheer volume of debt the US government needs to finance. Without meaningful fiscal consolidation, which requires congressional action that shows no signs of materializing, the Treasury is essentially managing the market’s mood rather than its underlying condition.

The 4.7% level on the 10-year note represents a partial equilibrium, but one that could shift in either direction depending on whether Bessent’s buybacks gain traction or get overwhelmed by larger forces.