Bessent downplays Treasury yield surge as global trend

The 10-year U.S. Treasury yield rose as high as 5.342% on Thursday, Oct. 1. It passed its 2007 peak and reached its highest level since early 2002, Reuters reported. The move came as a global sell-off in government debt sent borrowing costs in Europe and Japan to multi-decade highs too. In an interview published Saturday, Treasury Secretary Scott Bessent played down the jump. He said it reflects a worldwide trend, not a problem specific to the U.S..bfsi.economictimes.indiatimes+2

According to The New York Times, the yield fell back to about 5.24% later in the session. Even so, it ended the day at its highest close since 2007. The 30-year Treasury bond also hit a 24-year high. In the third quarter, the 10-year yield rose almost 90 basis points, its biggest quarterly increase this century.nytimes+2

A worldwide repricing

The sell-off has spread beyond the U.S. France's 10-year yield hit its highest level since 2002. Britain's 30-year borrowing costs passed 6% for the first time since 1998, and Japanese yields are at multi-decade highs. Britain's 30-year gilt yield peaked at 6.029% during the day, while its 10-year yield reached 5.51%, the highest since July 2007.mk+1

Several pressures are pushing yields up at once. Oil prices have risen again because of the U.S.-Iran conflict, raising inflation concerns, and governments keep borrowing heavily. U.S. federal debt passed $40 trillion in August. The U.S. personal consumption expenditures price index rose 3.4% in August from a year earlier, above the Federal Reserve's 2% target. Companies building out artificial intelligence are adding to the supply of debt. LSEG data cited by Reuters shows Alphabet ↗ 1.62%, Amazon Amazon.com, Inc. ↗ 1.33%, Meta ↗ 0.30%, Microsoft ↗ 0.92% and Oracle ↗ 3.06% have issued $220 billion of debt so far this year, more than double last year's total.bfsi.economictimes.indiatimes+1

Households are already paying more. Freddie Mac Federal Home Loan Mortgage Corporation ↗ 2.36% said the average 30-year fixed mortgage rate rose to 7.28% from 7.03% a week earlier. That was the biggest weekly increase in about four years.mk

Bessent: "I can't control the bond market"

Bessent told Axios that U.S. investors are not fleeing to other countries' debt. Bloomberg reported his remarks.bloomberg+1

> "I would be concerned if we were having some kind of idiosyncratic rise. We're not seeing people selling treasuries to buy German bonds or Japanese bonds."bloomberg

"I can't control the bond market. What I can do is get people to slow down and think," he said. He also rejected fears of an AI bubble. He argued that spending by companies such as Microsoft, Google and Meta is backed by large revenues.finance.yahoo+1

Friday's weaker-than-expected jobs report gave bond investors some relief. Still, the Treasury's recently announced bond buybacks have not stopped long-dated yields from rising. Investors told Reuters that long-term borrowing costs will fall for good only once governments act to cut debt or boost growth. Until then, "bond vigilantes will be on alert".bfsi.economictimes.indiatimes+1