US Treasury Secretary Scott Bessent Dismisses Bond Market Sell-Off, Citing Strong Economic Growth

US Treasury Secretary Scott Bessent on Tuesday minimized concerns regarding the latest bond-market sell-off amid mounting anxieties over escalating debt levels and energy-driven inflationary pressures. Speaking during a fireside chat at the G20 finance gathering in North Carolina, he stated that the US bond market remains the top-performing one and that short-term monthly fluctuations are insignificant.

US Treasury yields remained relatively stable on Tuesday following renewed strikes in the Middle East. The yield on the 10-year Treasury increased by 3 basis points to reach 4.788 per cent, while the 30-year Treasury note yield rose 1 basis point to 5.259 per cent. Mr Bessent emphasized that US bond markets indicate inflation expectations are low and declining, characterizing the current situation as a growth narrative.

Federal Reserve Chairman Kevin Warsh noted during the G20 conference on Monday that he anticipated gaining further insight into the growth outlooks of other nations. He observed that the global economy is transitioning into an era of secular growth after previously navigating a global savings glut.

To help steady US bond markets, the Treasury Department announced plans to at least double the volume of its government debt repurchases. Furthermore, the department will expand the size of its 10-20-year and 20-30-year options from $2 billion to $4 billion, with these adjustments taking effect from September 9 through November 4.

This strategy drew criticism from US investor and Mr Bessent's mentor Stanley Druckenmiller. In a Wall Street Journal op-ed published last week, Mr Druckenmiller described the action as a mistake significantly larger than a $4 billion figure implies, noting that although the Treasury's intervention initially pushed bond yields lower, they rebounded the next day. He argued that liquidity tools cannot resolve a solvency conversation, but merely delay it and increase the ultimate cost.

Mr Bessent disputed this criticism during a CNBC interview on Monday, pointing out that US bonds have remained flat since President Donald Trump took office.

Meanwhile, a broader global sell-off intensified on Tuesday after Japan's 10-year bond yield reached 3 per cent for the first time since 1996. In late July, the US and Japan had agreed to rare co-ordination efforts to support the stabilization of the yen. Concurrently, UK 10-year government bonds, or Gilts, touched their highest yield since 2008, and the UK 30-year Gilt reached its peak since March 1998. Germany's 30-year Bund also hit a 15-year high amid rising yields in France and Italy.

During a sideline meeting with Bank of Japan Governor Kazuo Ueda at the G20 gathering, the Treasury reported that Mr Bessent highlighted the significance of close US-Japan co-ordination regarding shared macroeconomic objectives. The department stated that the secretary stressed the necessity of clear monetary policy communication to anchor inflation expectations and prevent excessive exchange rate volatility, while also backing Japan's decisive measures to counter the yen's severe undervaluation and its impact on domestic inflation.