Bessent Says Treasury Has Big Toolkit If Needed for Bonds
Takeaways NEW
Treasury Secretary Scott Bessent rejects speculation that foreign nations are dumping their US Treasury holdings, citing increased foreign demand at recent auctions.
Summary by Bloomberg AIBessent attributes the recent bond market selloff to deleveraging, and says the Treasury has tools to address dislocation if needed, including a buyback program for older securities.
Summary by Bloomberg AIBessent downplays concerns about the dollar's status as a global reserve currency, and expresses confidence in the US's ability to negotiate favorable trade deals.
Summary by Bloomberg AI
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Treasury Secretary Scott Bessent played down the recent selloff in the bond market, rejecting speculation that foreign nations were dumping their holdings of US Treasuries, while flagging that his department has tools to address dislocation if needed.
“I don’t think there’s a dumping” by foreign investors, Bessent said in an interview Monday with Bloomberg Television while on a visit to Buenos Aires, Argentina. He pointed to what he said was increased foreign demand at auctions for 10-year and 30-year Treasury securities last week.
Bessent reiterated his interpretation of the decline being mainly a product of deleveraging. “I have no evidence that it’s sovereigns” behind the drop, he said.
“We are a long way” from needing to take action, he said. But “we have a big toolkit that we can roll out” if so. Included in that toolkit is the department’s buyback program for older securities, Bessent said. “We could up the buybacks if we wanted.”
The Treasury last year began the first regular buyback program since 2000-02, designed to improve liquidity in older securities that are less frequently traded than the newer, so-called on-the-run Treasuries. In past episodes of official intervention in the market, the Federal Reserve has been the main actor, buying up large volumes of debt in the secondary market.
Treasuries saw their biggest weekly slide since 2001 last week, alongside a decline in the dollar — which some market participants highlighted as a sign of diminishing international confidence in American assets.
Asked about whether, in his latest weekly sit-down with Fed Chair Jerome Powell, there was any discussion of concerns about the Treasury market, Bessent said, “Specifically, did we discuss some kind of a break the glass? I think we’re a long way from that.”
Pressed on whether Powell was concerned, he said “I think we would have heard from the Fed chair” if that were the case.
He also said that the timeline for interviewing candidates to succeed Powell, whose term as chair runs out in May next year, was “sometime in the fall.” Bessent reiterated his respect for the US central bank’s independence in deciding on monetary policy, saying that was a “jewel box that has got to be preserved.” With regard to regulatory policies, there can be more of a discussion, given that the Fed is one of multiple bank regulators, he said.
The former hedge fund manager said one lesson from his career was “not to look at what happens over a week.” Trading history is “the scar tissue that sticks with you,” he said, recalling the 1998 bust of Long Term Capital Management, which he said had “nothing to do with anything” other than investors acting with excessive leverage.
Dollar Status
Bessent rejected concerns about the simultaneous decline in Treasuries and the dollar last week signifying that the US was losing its haven status.
“We are still a global reserve currency” and there is still a “strong dollar policy,” Bessent said.
The Treasury chief also contested China’s characterization of President Donald Trump’s steep tariff hikes on Chinese products as a “joke.”
“Maybe the trade minister has a different sense of humor but I don’t see anything funny about it,” Bessent said.
With regard to trade talks, there will be a first-mover advantage, he said. “Usually, the first person who makes the deal gets the best deal.” He also said that there may not be an actual trade “document” by the end of the 90-day pause period Trump announced for trading partners besides China last week, but there may be an “agreement in principle” that allows the US and the partner nation to move forward.
The Treasury chief was visiting Argentina to show support for the country after it received a new round of IMF funding last week, and met earlier with President Javier Milei, a noted supporter of Trump.
Read more: Bessent Expects Argentina to Be Able to Pay Off China Swap
On tax talks: Bessent Says ‘Everything’s On the Table’ for Taxes on Wealthiest
(Updates with comment on Powell succession and other details starting in second paragraph after chart.)
