▲ U.S. Treasury Secretary Scott Bessent
U.S. Treasury Secretary Scott Bessent stated on the 20th (local time) that the scale of Treasury buybacks could exceed 4 billion dollars (approx. 5.58 trillion KRW) per operation.
Appearing on U.S. economic broadcaster CNBC that day, Secretary Bessent said, "We have many policy tools (at our disposal), so we'll see," adding, "Part of that is sending a signal here, to show that current Treasury yields do not properly reflect underlying economic conditions."
Secretary Bessent's remarks came a day after the U.S. Treasury announced it would double the size of long-term Treasury buybacks from 2 billion dollars to at least 4 billion dollars per operation.
Starting September 9, the Treasury plans to expand buybacks targeting long-term Treasuries, such as 10-to-20-year and 20-to-30-year bonds.
U.S. Treasury buybacks involve repurchasing existing government bonds traded in the market, a mechanism designed to enhance liquidity in specific maturity segments and ensure smooth market functioning.
Following the Treasury's announcement, the yield on 30-year U.S. Treasuries plummeted, but it has since retraced most of that decline.
U.S. Treasury yields maintained their upward trend even after Secretary Bessent's remarks that day.
Regarding the rebound in Treasury yields, however, he downplayed it, stating, "Everything that happens within 24 hours is just noise."
He also previewed that the U.S. administration will "make an announcement focusing more on fiscal consolidation this week or early next week."
Regarding the U.S. national debt surpassing 40 trillion dollars for the first time in history, he said, "There is no special significance to the number 40 trillion dollars," adding, "We can grow our way out of this problem."
He added, "The message to allies and trading partners is that global growth is the way to solve this mountain of debt."
Regarding the massive corporate bond issuances by AI companies, which have been pointed to as another factor driving up long-term bond yields, he made remarks that seemed to advise expanding the issuance of medium-term bonds, such as 5-year notes, instead of high-yield long-term bonds.
He explained, "Companies believe that the returns from building AI infrastructure will be very high," noting that they are largely unconcerned by current high borrowing costs.
He then stated, "If I were in the shoes of a chief financial officer (CFO), I would think about issuing more of the so-called 'belly bonds' (the intermediate maturity segment of the yield curve), such as 5-year bonds."
He projected that if AI brings a significant boost in productivity, inflationary pressures will naturally ease and interest rates will decline, forecasting that "(building AI infrastructure) is causing a competition for funding in the short term, but it will ultimately lead to a real increase in productivity."
(Photo: AP, Yonhap News)
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