Bessent Says Global Issues Behind Treasury Yield Surge as US 10-Year Tops 5%, Highest Since 2007
Summary
- The 10-year US Treasury yield surged above 5%, reaching its highest level since 2007.
- Markets cited rising oil prices, expectations of a benchmark rate increase, expanding artificial intelligence (AI) investment, and concerns about the fiscal outlook as factors driving Treasury yields higher.
- Bessent said the fiscal deficit and the expanded long-term Treasury buyback program are affecting long-term Treasury yields, while investors are also watching the Fed’s rate decision.
Forecast Trend Report by Period
US Treasury Secretary Scott Bessent said global factors were the main force behind the recent surge in Treasury yields.
Bessent made the remarks to reporters before appearing at a House Financial Services Committee hearing on September 15, Reuters reported. He said the recent rise in Treasury yields was driven by “global issues.”
The yield on the 10-year US Treasury note rose above 5% that day, reaching its highest level since 2007. Bond yields in other major economies also climbed, extending a global selloff in debt markets.
Markets have pointed to higher oil prices caused by Middle East supply disruptions and expectations of another Federal Reserve rate increase as key drivers of the jump in yields. Heavy funding demand tied to expanding artificial intelligence investment, along with concerns about the US fiscal outlook, has also added pressure to the bond market.
At the hearing, Bessent acknowledged that the US fiscal deficit is also contributing to higher long-term Treasury yields. He said the rise in the 10-year yield reflected several factors, including “the need to address the fiscal deficit.”
Yields have continued to rise even after the Treasury recently doubled the size of its long-term bond buybacks. Even so, Bessent argued that yields could have climbed even more without the buybacks, highlighting what he described as the policy’s effectiveness.
“You have to think about the counterfactual of what would have happened otherwise,” he said. He added that the buybacks were followed by “the two most successful Treasury auctions in 20 years.” Bessent also argued that the US bond market has posted the best performance among developed markets since the Trump administration took office.
Markets are also focused on the Federal Reserve’s rate decision due on September 16. With oil prices rising and inflation pressures persisting, investors increasingly see the Fed as likely to raise its benchmark rate for the first time since July 2023.
Suehyeon Lee
shlee@bloomingbit.ioI'm reporter Suehyeon Lee, your Web3 Moderator.