BlockBeats report, August 25: According to Fox Business News, informed Wall Street executives say U.S. Treasury Secretary Bentsen will do "whatever it takes" to deter bond vigilantes shorting long-dated U.S. Treasuries and attempting to push the 10-year yield to 5%. Possible measures could include Treasury buybacks, increased issuance of short-term debt, and "potentially eliminating longer-term Treasuries such as the 20-year."
Sources say these measures are short-term solutions aimed at preventing yields from rising further and avoiding high interest rates from stifling growth as the midterm elections approach. However, Wall Street analysts point out that this does not address the fundamental issue: U.S. debt has reached $40 trillion, and AI infrastructure development is intensifying competition for capital. Over the long term, the Trump administration is not expected to implement fiscal austerity for the remainder of its term; the plan remains to escape debt through economic growth and increased tax revenues. Given such high debt levels, the real solutions—higher taxes or austerity—could trigger a recession.
Previously, Bessent targeted the $1 trillion emergency fund to pay for U.S. Treasuries, leveraging the TGA account to give the Treasury powerful tools to influence long-term bond yields.