Treasury yields rebound after Bessent announces more bond purchases

Federal debt at $40 trillion as interest payments are projected to absorb 13.5% of federal spending

Treasury Secretary Scott Bessent announced last week that the government would sharply ramp up its purchases of Treasury bonds — an effort to push their prices higher and yields lower — but the effect proved temporary, according to The Guardian. Yields on Treasuries fell after the intervention and then rebounded, with the 10-year yield ending the week at 4.69% on August 24. The 30-year yield was again trading near its highest level in two decades.

The Guardian reported that total federal debt has reached $40 trillion and that interest payments this year are projected to absorb 13.5% of all federal spending — more than defense and more than double the 5.2% recorded in 2021. With the budget deficit hovering at about 6% of GDP, the government must add roughly $10 billion a day, net, to the outstanding stock of Treasuries.

President Trump has called interest rates “ridiculous” and “artificially high” and has said the Federal Reserve had not cut them. Trump has criticized Switzerland for having lower interest rates than the United States and, in remarks reported by The Guardian, asserted that he had the “absolute right” to cut off all US business with the country. He suggested that “the ultimate intervention is our military,” a comment The Guardian said hints at a novel approach to monetary policy.

The pressure on yields sits on top of a longer-running shift in who owns the federal debt. Between the turn of the century and the Great Recession, foreign central banks increased their Treasury holdings from about 20% to more than 30%, building reserves to ward against speculative attacks or manage exchange rates, The Guardian reported. Foreign private investors piled in alongside them, and by 2008 more than half of all Treasury bonds were held abroad.

That position has eroded. Foreign central banks, mainly in China and Japan, have pared back their holdings sharply, while private foreign investors have picked up some of the slack. By mid-2025, private foreign investors held $7 trillion in Treasuries — almost twice the $3.9 trillion held by foreign official entities — and the overall foreign share has fallen roughly 10 percentage points over two decades to about 40%, The Guardian reported.

The change in composition carries a different risk profile, The Guardian said. Unlike foreign official entities, which hold bonds primarily to ensure financial stability, private investors seek returns and are willing to sell when conditions change, making the Treasury market more volatile than it was when foreign central banks dominated it.

US government debt no longer carries the top credit rating from the major agencies, requiring it to offer a higher yield than many other affluent nations, according to The Guardian. When Trump announced his “Liberation Day” tariffs against trading partners in April of the previous year, investors dumped Treasuries as they would an emerging market bond — a departure from the historical pattern of Treasuries rising in price during moments of high risk.

The Guardian placed the central risk at home. “The main threat to treasurys’ status as the paramount store of value in the world, though, comes from within,” the report said, pointing to the rapid growth of supply to fund the deficit and the loss of the top credit rating as the drivers.

Financial leaders abroad have not yet found a comparable asset to store wealth, and Treasuries retain what remains of their status largely because no obvious substitute has emerged, The Guardian reported. The search for alternatives is underway, the report said, and Bessent’s intervention has not been enough on its own to overcome concerns about US economic governance or to match the supply of new debt coming to market.