{"id":695,"date":"2026-08-24T09:07:51","date_gmt":"2026-08-24T09:07:51","guid":{"rendered":"https:\/\/frontierhousingreport.com\/?p=695"},"modified":"2026-08-24T09:07:51","modified_gmt":"2026-08-24T09:07:51","slug":"why-scott-bessent-cant-fix-the-bond-market","status":"publish","type":"post","link":"https:\/\/frontierhousingreport.com\/?p=695","title":{"rendered":"Why Scott Bessent Can\u2019t Fix the Bond Market"},"content":{"rendered":"
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During the past several months, Treasury Secretary Scott Bessent made a big bet that interest rates were coming down. A whole lot of old 30- and 10-year Treasury bonds with old, low interest rates are coming due over the next year or so, and if they were to be simply rolled over into new same-dated bonds, high borrowing costs would be locked in for a long time. So Bessent rolled them over into short-term bonds instead. The hope was that interest rates would come down, and he wouldn\u2019t have to lock in very high rates.<\/p>\n

Read more That Stunning Florida Senate Win<\/a><\/p>\n

Instead, the opposite happened, and 30- and 10-year rates are at their highest levels in 20 years. Interest costs on the national debt now easily outstrip spending on the military, and are projected to grow, a lot.<\/p>\n

More from Ryan Cooper<\/em><\/strong><\/p>\n

Donald Trump, of course, is enraged at high interest rates. So Bessent has been resorting to goofy schemes typically seen in a rickety nation suffering a currency crisis rather than in the global hegemon and possessor of the global reserve currency. Recently, he did a euro-yen currency swap in an attempt to boost the strength of the yen, and thus keep the Japanese government from selling off any of its tremendous stockpile of U.S. government bonds. He didn\u2019t even call European Central Bank officials beforehand, which infuriated and offended them. It also didn\u2019t work beyond a few days.<\/p>\n

Last week, Bessent attempted another bond trade, selling off some short-term bonds to buy long-term ones. As Paul Krugman points out, it was similar to the quantitative easing the Federal Reserve did to juice the economy after the financial crisis, except it was only a tiny fraction of the size of the Fed\u2019s actions, and in a radically different economic context. Bond markets didn\u2019t buy that one either.<\/p>\n

Bessent\u2019s proximate problem is Donald Trump. Joe Biden\u2019s Treasury secretary, Janet Yellen, made a similar interest rate bet during his term, and if Kamala Harris had won in 2024, Yellen\u2019s bet likely would have paid off. Back in those halcyon days, the post-pandemic, post-Ukraine inflation shock had largely been digested, and things were headed toward something like 2 to 3 percent inflation rates. That year, the Fed cut rates three times in quick succession, reducing the target rate by one percentage point.<\/p>\n

But Trump has put prices and interest rates back on an upward trajectory, probably indefinitely. First, his deranged on-again, off-again trade war with the entire world has mechanically increased prices, disrupted trade, and greatly increased business uncertainty, prompting many to raise prices even more than current conditions require, out of fear that those conditions will continue to worsen. Second, the massive tax cuts for the rich in his Big Beautiful Bill seriously increased the rate of borrowing.<\/p>\n

Third, Trump\u2019s repeal of Biden\u2019s climate investment subsidies, and his irrational hatred for renewable-energy projects, has severely crimped the pipeline of new energy capacity, thus putting more upward pressure on electricity prices.<\/p>\n

Read more Top Pentagon Official Contracted Personal Lawyer to Handle Pentagon Minerals Deal<\/a><\/p>\n

Fourth, Trump\u2019s war on Iran has created a huge oil shock. The prices of gasoline, diesel, natural gas, aluminum, and sundry other commodities are up, with no end in sight, and so are prices of anything related to shipping or plastics\u2014that is, almost everything.<\/p>\n

All that inflation pressure limits the Federal Reserve\u2019s hand when it comes to interest rates. If they cut now\u2014particularly with a lending-driven AI data center boom still going gangbusters\u2014price increases might get more out of hand than they are now. Some members of the Fed\u2019s Board of Governors want to raise rates rather than cut them.<\/p>\n

Moreover, all this totally deranged behavior and Trump\u2019s obvious mental decline has clearly spooked bond markets. The issuer of the global reserve currency is supposed to behave with a modicum of professionalism and rationality. The head of state is not supposed to be starting obviously unwinnable wars that cut off a fifth of the global oil supply for no reason, much less getting front-page headlines for his highly alarming relationship with a clearly unhinged young woman 45 years his junior.<\/p>\n

Indeed, Bessent\u2019s antics are likely making the interest and debt problems worse. Take his quasi-QE trick last week, which is just comically stupid. Compared to the post\u2013Great Recession period, unemployment is low rather than high, inflation is high rather than low, the reported $4 billion in purchases is a drop in the $32 trillion ocean of debt held by the public, and above all Bessent cannot print money like the Fed can. (By way of comparison, Fed Chair Ben Bernanke\u2019s 2010 round of quantitative easing bought $600 billion in Treasurys.) It is beyond obvious that Bessent is only doing this to appease Trump, and cautious investors will be compelled to demand higher rates in response, or park their money elsewhere.<\/p>\n

It\u2019s telling to note that when Yellen made her interest rate bet, none other than Scott Bessent attacked her for doing it, saying she had \u201cdistorted Treasury markets.\u201d Indeed, he also made a lot of money early in his bond-trading career betting that the Bank of England would not be able to protect its currency with moves similar to the ones he is carrying out right now. He probably understands\u2014or used to understand\u2014that his silly games are worse than useless.<\/p>\n

But Trump is done hearing any criticism or explanation for why he can\u2019t get whatever he wants, right now and all the time. Bessent will either caper for the degenerate emperor\u2019s amusement, or he will be replaced by an even dumber groveling sycophant.<\/p>\n

Read more Two Americas: Anti-ICE Fighters vs. Bootlickers<\/a><\/p>\n<\/div>\n


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