U.S. Treasury Secretary Scott Beckett emphasized on September 1 that the U.S. Treasury market has outperformed those of other major countries, but long-term U.S. Treasury yields are rising again. Following Beckett's announcement last month to expand Treasury purchases, long-term rates, which had temporarily stabilized, have returned to previous levels in less than a month, raising questions about whether bond purchases alone can curb rising interest rates.
Beckett claims strong performance since Trump's inauguration, CNBC counters
According to U.S. media including CNBC, Beckett stated during a G20 finance ministers and central bank governors meeting in Asheville, North Carolina, that "since the inauguration of the Trump administration, the U.S. has had the best-performing bond market among major countries."
However, on the same day, long-term U.S. Treasury yields rose again. The yield on 30-year bonds climbed to 5.27%, returning to the level seen just before Beckett announced the expansion of Treasury purchases on August 19. The benchmark 10-year Treasury yield also increased to about 4.8%, marking the highest level in approximately 20 months since January 2025.
Beckett remains unconcerned about the recent rise in interest rates. He stated, "What happens in a month is not important." In a previous interview with CNBC, he emphasized that if there were issues in the U.S. Treasury market, investors would sell U.S. bonds and buy bonds from other countries, indicating that the U.S. bond market is relatively performing well.
However, CNBC noted that Beckett's assessment of the U.S. Treasury market's performance is based on the inauguration date of President Trump, January 20, 2025, as bond markets often reflect anticipated changes before actual policies are implemented.
Investors have anticipated inflation and increased Treasury issuance due to tax cuts, tariffs, and expanded fiscal spending ahead of the 2024 presidential election, where Trump's chances of re-election have increased. Consequently, they have sold U.S. Treasuries, leading to a significant rise in bond yields.
In fact, the yield on 10-year U.S. Treasuries rose by about 1 percentage point from a low in mid-September 2024 to the time of Trump's inauguration. Therefore, CNBC pointed out that focusing solely on interest rate movements after Trump's inauguration could overlook concerns about Trump’s policies that were already reflected in the market prior to his inauguration. Considering this, the performance of the U.S. Treasury market over the past two years is analyzed to be average among major countries.
Purchases alone won't suffice; 'structural issues' must be addressed
In reality, the rise in U.S. interest rates is not solely a problem of the Trump administration. Recently, concerns about rising oil prices and increased government spending have spread to the global bond market.
On the same day, the yield on German 30-year bonds reached its highest level since 2011, while the yield on British 30-year bonds hit its highest since 1998. The global Treasury yield index compiled by Bloomberg also rose to its highest level in about 20 years. With Treasury yields surging worldwide, there are fears that a situation similar to the 1997 Asian financial crisis could be repeated.
In the U.S., uncertainties surrounding the Federal Reserve's monetary policy, coupled with geopolitical tensions from Iran, add to the complexity. If military operations resume around the Strait of Hormuz, rising oil prices could exacerbate inflation concerns, making it difficult for the Fed to lower interest rates and putting upward pressure on Treasury yields.
Beckett stated that the Treasury has a "big toolkit" of policy measures to stabilize Treasury yields and announced plans to at least double the scale of Treasury purchases. The expanded purchases are set to begin on September 9, so it is too early to assess the policy's effectiveness based solely on current interest rate movements.
However, there are concerns that the Trump administration's policies, including large-scale fiscal spending, increased Treasury issuance, tariffs, and rising oil prices, could actually heighten upward pressure on interest rates.
Dan Morehead, founder and co-CEO of Pantera Capital, commented on Beckett's market intervention during an interview with Bloomberg TV, stating, "For bluffing to work, no one at the poker table should know you are bluffing," adding, "I think it ultimately backfired." This suggests that simply purchasing Treasuries will not resolve the structural factors contributing to rising long-term interest rates, such as fiscal deficits and national debt.
* This article has been translated by AI.
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