Last week, the 30-year U.S. Treasury yield surged to its highest level in 19 years. Yes, you read that correctly. We haven’t seen levels like this since 2007.
And as if that wasn’t enough, U.S. national debt surpassed $40 trillion. At the same time, the Treasury Secretary made a move that left the market stunned.
Let’s start from the beginning. On Tuesday, the yield on the 30-year U.S. Treasury touched 5.33%, its highest level since 2007, while the 10-year yield climbed to around 4.65%.
“And why should we care about bonds, Christos?” you might be wondering. Let me explain.
When investors massively sell long-term bonds, their yields rise. And that’s like a thermometer. It shows that the market is worried about the future.
What is it worried about? Mainly three things.
First, inflation. In July, it came in at 3.4%, well above the 2% target set by the FED.
Second, the ever-growing deficit.
And third, a weaker dollar.
But there’s another factor that few people have noticed. Big technology companies are issuing one bond after another to finance their AI infrastructure and data centers.
And this is where things get even more interesting. Because the root of the problem is debt.
This week, U.S. national debt surpassed $40 trillion. And pay attention to this. They added a full $1 trillion in just a few months. In just a few months.
You might say, “So what? Why does it matter?”
It matters because debt comes with interest. And interest costs have reached eye-watering levels.
In just the first 10 months of this year, the U.S. paid $963 billion in net interest. Almost $1 trillion. Just in interest.
And to understand how quickly this is moving, around $1.8 trillion of new debt was added during the current year. That includes roughly $100 billion from tariff rebates.
In simple terms? The more debt grows, the more bonds the government has to issue. And the more bonds hit the market, the more yields rise.
A vicious cycle.
And this is where the most interesting part of the whole story comes in. Because Treasury Secretary Scott Bessent entered the picture.
What did he do?
He doubled the pace of debt buybacks. In other words, the government itself is buying back its own bonds in an attempt to push yields lower.
We’re talking about at least $4 billion per operation, starting September 9. And he even said he is prepared to go further if necessary.
And initially, it worked.
The 30-year yield fell to 5.196%.
But the relief didn’t last long. Within just a few days, the yield climbed back to around 5.27%.
In other words, the market literally erased the rally.
And this raises a huge question.
Who actually controls interest rates in America?
The central bank or the Treasury Department?
Because the new FED chairman, Kevin Warsh, has said that the central bank should give the Treasury more authority over matters related to its balance sheet.
And when you see the Treasury Secretary intervening in the bond market, you start questioning the independence of the FED. And believe me, that is not a small issue.
On Friday, August 28, Warsh will speak at Jackson Hole.
And everyone will be hanging on his every word.
Because that’s when we’ll find out where he really stands.
