By David Lawder and Susan Heavey
Aug 20 (Reuters) - U.S. Treasury Secretary Scott Bessent said on Thursday he may further increase the government's repurchases of Treasuries, attempting to jawbone a government debt market that was beginning to balk after the previous day's surprise plan to double buybacks.
Bessent, a former hedge fund manager with extensive experience in sovereign debt and currency markets, said the recent upswing in long-dated Treasury yields to near two-decade highs was unwarranted
against the vibrancy of the U.S. economy. He also pointed to the Trump administration's plans to curtail government spending that has driven the collective U.S. IOU to the world north of $40 trillion.
In the latest of Bessent's increasingly interventionist maneuvers, the Treasury on Wednesday announced that it would double the size of buybacks on longer-dated securities over the next quarter to at least $4 billion per operation, a move that for one day at least brought the administration some relief from the high bond yields that are rapidly driving up federal debt service costs.
"We're going to increase the size of the buyback," Bessent said in a CNBC interview. "I would note that it could be more than the $4 billion per issue."
The 30-year yield dropped on Wednesday by the most in a day since last October after Bessent's tactic caught the market by surprise amid thin late-summer trading and liquidity conditions.
By Thursday, however, half of that move was retraced and a brief lurch lower in yields on his comments to CNBC held only for a few moments. The 30-year yield last traded at 5.24%, only about 10 basis points from its high point on Tuesday, when it struck the highest since June 2007.
Bessent, who earlier this month executed the first joint intervention in the Japanese yen in 15 years, told CNBC that his objective was to support liquidity in an area of the market that is thinly traded, especially in August, while having to compete with a large volume of corporate issuance at higher yields, including for artificial intelligence infrastructure.
"Part of it is signaling here, and to show that we believe that the yields don't reflect the underlying fundamentals. This Iran conflict, we will get on the other side of this, we don't know when," Bessent said.
A day after total U.S. public debt outstanding crossed the symbolic $40 trillion threshold, Bessent said he and White House budget director Russell Vought will be embarking on a new fiscal consolidation effort directed by President Donald Trump, and that combined with efforts to cut waste, fraud and abuse, savings of several hundred billion dollars could be found.
He added that there was "nothing magic about the $40 trillion figure" and that the U.S. would grow its way out of the debt. In the meantime, he said that the deficit this year has been pushed up by refunds of Trump's tariffs, which were declared illegal by the Supreme Court — a phenomenon that would not be repeated next year, as new tariffs are being implemented under other trade laws that have withstood court challenges.
He added that he expected 2026 tariff revenues to match those of 2025, but did not specify whether he was referring to calendar or fiscal years.
Also curbing revenues is a wave of factory and data-center construction that is being immediately expensed against corporate profits under the Republican 2025 tax cut act, causing a drop in corporate tax revenues, Bessent said.
But costs over which the administration has little sway — for social safety net programs such as Social Security and Medicare — continue to rise, along with the costs to finance the deficit. Interest payments alone so far this fiscal year have totaled almost $1.2 trillion, nearly matching last year's total with two months remaining in the government budget year.
High government bond yields — particularly longer-dated ones — raise borrowing costs for businesses and households, not just the government.
The interest rate on a 30-year fixed-rate mortgage, a staple of the U.S. homeowner market, has risen by more than half a percentage point to its highest in a year since Trump and Israel launched attacks against Iran in late February. That event has driven up energy costs and inflation more widely, and all but dashed any hope of rate cuts by the Federal Reserve.
(Additional reporting By Dan Burns; Editing by Chizu Nomiyama and Edmund Klamann)
