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Bessent bond market battle warning
Archived — this story has rotated out of today’s deck. It is kept here in full.
The gist
Treasury Secretary Scott Bessent doubled bond buybacks to $4bn to lower yields. His former mentor Stanley Druckenmiller warns he will lose this battle with bond markets.
Background
The US Treasury under Scott Bessent has been trying to calm bond markets and push down long-term borrowing costs, which have been rising due to large government deficits and inflation. Bessent doubled the maximum size of Treasury buyback operations from $2bn to $4bn, but yields quickly rebounded, leading to criticism from analysts and his former mentor.
How it unfolded
- Aug 19, 2026Treasury Secretary Scott Bessent decided to at least double the maximum size of the Treasury's buyback operations from $2bn to $4bn, briefly lowering long-term yields.
- Aug 20, 2026Analysts express skepticism that the buyback program will have lasting impact, noting it is small compared to the overall Treasury market.
- Aug 24, 2026Stanley Druckenmiller, Bessent's former mentor, publishes an op-ed in the Wall Street Journal warning that Bessent will lose the battle with bond markets and should cut the budget deficit instead.
- Aug 24, 2026CNBC reports that Bessent could increase bond-buying firepower by using the Treasury's near-$1tn General Account.
Who’s saying what
- Bears
- Stanley Druckenmiller warns that 'governments defending prices against fundamentals always lose' and that the Treasury should cut the deficit rather than suppress yields.
- Analysts
- Krishna Guha of Evercore ISI says the operation 'changes almost nothing in terms of the fundamentals' and that the need to finance deficits remains.
- Caution
- Axel Rudolph of IG notes that Bessent's intervention signals Washington is increasingly uncomfortable with soaring long-term borrowing costs.
Still unverified
Reports that Bessent could use the Treasury's General Account for bond purchases are based on a CNBC report and not officially confirmed.