Bessent wants bigger bond buybacks, but markets barely blink

United States (US) Treasury Secretary Scott Bessent said on Thursday that the Treasury could increase bond buybacks beyond $4 billion, partly to signal that current yields do not reflect underlying economic fundamentals. He stressed that interest rates have nothing to do with the buyback decision.

On fiscal policy, Bessent said there is a very good chance that the US deficit has already peaked and indicated that the administration will likely increase its focus on fiscal consolidation. He also played down the $40 trillion debt threshold and expects tariff revenues in 2026 to remain similar to 2025 levels.

Bessent added that the Treasury and the Federal Reserve (Fed) would coordinate in the event of changes to the central bank’s balance sheet. On inflation, he noted that market indicators point to lower price pressures ahead.

Key takeaways

Buyback could be more than 4 billion.

Part of it is signaling.

We want to show that yields do not reflect underlying fundamentals.

Probably going to announce increased focus on fiscal consolidation.

Nothing magic about $40 trillion debt number.

Expect tariff 2026 income will be similar to 2025.

Very good chance we've seen peak deficit.

Markets got a little ahead of itself.

Treasury and Fed would work together if any change in balance sheet.

We would adjust.

Rates have nothing to do with buyback decision.

Markers are saying [inflation] will be lower in future.

Market reaction

The US Dollar (USD) showed little reaction to Bessent’s comments, with the US Dollar Index (DXY) remaining broadly unchanged on Thursday, trading around 98.80 at the time of writing. Meanwhile, the benchmark 10-year US Treasury yield remains supported after Wednesday’s decline, rising by more than 6 basis points on Thursday to around 4.70%.