Treasury to buy back $6bn in bonds as 30-year yields keep climbing

Fed chair Warsh faces decision as Trump demands lower rates

The US Treasury will buy back $6bn worth of government debt to stabilize a bond market where yields on long-dated US debt have climbed to their highest level since the 2008 financial crisis, Treasury Secretary Scott Bessent announced Wednesday. The announcement failed to reverse the sell-off: 30-year Treasury yields continued to rise even after Bessent disclosed the size of the operation, according to The Guardian.

The intervention underscores the scale of investor concern about US fiscal health and the inflationary pressures stemming from the war in Iran. Treasury yields serve as the benchmark for a range of consumer borrowing costs, including mortgages, car loans and student debt. The average rate on a 30-year fixed mortgage stood at 6.71% as of September 9, according to Federal Reserve data.

The $6bn buyback expands an effort Bessent announced on August 19, when he said the Treasury would at least double its typical buyback operations. The economics of the move are straightforward: fewer bonds on the open market should push prices up and yields down. But the strategy has not yet worked. In the three weeks since Bessent’s first announcement, Treasury yields have continued to climb.

The 30-year Treasury bond yield hit about 5.2% on Wednesday — the highest level since the 2008 financial crisis. Rising yields reflect two principal investor concerns: persistent inflation, which erodes the value of fixed-income payments, and the long-term trajectory of US federal debt. In August, US government debt for the first time crossed the $40 trillion threshold, double the level of a decade ago.

Higher yields are already feeding into household budgets. Loans tied to the bond market — including mortgages, auto loans and student debt — carry higher interest rates as Treasury yields rise. The 6.71% average rate on a 30-year fixed mortgage reflects the transmission from sovereign debt markets to consumer borrowing costs.

The bond market is also responding to inflation pressures tied to the war in Iran. Annualized inflation hit a three-year high in May before easing to 3.4% in July — still 0.7 percentage points above the year-earlier rate, driven largely by higher energy prices. On Wednesday, Brent crude, the international benchmark for oil prices, rose past $100 a barrel for the first time since July as Middle East conflict continued to escalate.

The combination of rising yields and persistent inflation is putting pressure on the Federal Reserve to act. Fed Chair Kevin Warsh, who stepped into the role in May, faces a constrained decision: raising interest rates would help fight inflation but would also push borrowing costs higher, while cutting rates would risk stoking prices further. In a closely watched speech at the Fed’s Jackson Hole symposium in August, Warsh affirmed that it was “the Fed’s job to deliver stable prices,” but stopped short of signaling whether the central bank would raise rates soon.

President Donald Trump has pressed publicly for the opposite course. Last week he wrote on social media that the Fed “must get smart” and lower interest rates, adding: “A STRONG COUNTRY MEANS A LOWER INTEREST RATE.” The pressure places Warsh in a politically charged bind between the Fed’s inflation-fighting mandate and the White House’s stated preference for lower rates.

Bessent’s $6bn buyback announcement is the next concrete step in the bond-market intervention MSI previously reported on, when the Treasury secretary stepped in as “bond trader in chief” after US gross debt crossed $40 trillion for the first time: Bessent steps in as bond trader in chief after US debt tops $40T.