Sometimes the house doesn’t win.
At a fireside chat at Southern Methodist University last week, Treasury Secretary Scott Bessent scoffed at those who doubted the wisdom of his interventions in currency and bond markets and dared investors to bet against him.
“It’s my dream,” Mr. Bessent said. “I have asymmetric information. I am the house now.”
He added: “You can bet against me if you want.”
On Monday, the bond market rebuked Mr. Bessent. The yield on 10-year Treasury bonds surpassed 5 percent for the first time since 2023 and only the second time since the 2008 financial crisis. The spike in yields — which represents the interest rate that investors are demanding to be paid in order to buy government debt — defied Mr. Bessent’s efforts to suppress those costs when he ordered the Treasury Department to buy back $5.2 billion of long-dated debt.
Crossing the 5 percent threshold demonstrated the limits of the Treasury secretary’s ability to bend global markets to his will. It also dealt a blow to his credibility as a market oracle.
A former hedge fund manager, Mr. Bessent made much of his money betting against the British pound and the Japanese yen. Now, as Treasury secretary, he is going to great lengths to convince the world that U.S. bonds are a good investment despite the nation’s $40 trillion debt load.
The rising bond yields are a political problem for the Trump administration because they translate to higher borrowing costs for Americans. This increases the cost of living in the United States and can also squeeze corporate earnings, which underpin the stock market, by increasing what it costs for companies to borrow money.
In June, Mr. Bessent, while speaking at the Economic Club of New York, underscored the importance of the bond market, noting that he has warned President Trump that “the bond market has taken out more governments than howitzers.”
In recent months, Mr. Bessent has insisted that the Treasury market is in “very good shape,” that it is outperforming the bond markets of other countries and that its performance is correlated with elevated energy prices. He has also blamed traders for looking to create a panic about the trajectory of the U.S. economy, suggesting that a misunderstanding about the fundamental strength of the economy is creating a “fever dream” that is distorting the bond market.
In an interview with Steve Bannon last week, Mr. Bessent insisted that “Bloomberg terminal bros” are misguided about the state of the Iran war and that he has information about what policymakers will do that the rest of the public does not know. The Treasury secretary argued that some investors could even be shunning U.S. bonds because they do not like Mr. Trump and his policies.
“Many of these people have such disdain for the administration, want to see us fail or would take their pocket book over patriotism, that they don’t want to listen,” Mr. Bessent said. “I am not saying I’m always right, don’t challenge me, but I am trying to say that I have superior information and that I am trying to create good framing, so they don’t panic.”
But for now, the bond market is not buying it.
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