US Treasury Secretary Scott Besent has expressed an increasing willingness to intervene in bond markets, at a time when the US administration is facing an uncomfortable rise in long-term borrowing costs.
The Treasury Department announced, on Wednesday, that it would significantly increase its purchases of government bonds as part of its existing debt buyback program, in a move that came after the 30-year US bond yield exceeded 5.3 percent this week, recording its highest level in nearly two decades.
Under the new plan, the Treasury will raise, starting September 9, the maximum limit for its purchases of Treasury bonds with maturities between 10 and 30 years to at least $4 billion per transaction, compared to $2 billion currently, according to a report by the American Wall Street Journal.
The announcement was quickly reflected in the markets; Treasury bond yields fell, while US stocks rose.
“I've been saying that bond traders can stop panicking when the Fed starts panicking,” Jim Bianco, president of Bianco Research, said in a post on the X platform following the announcement. "I think I should have said: 'When Scott Besant starts to panic.'
The move reinforces the image of Besent, a former hedge fund manager, as a Treasury secretary with extensive market experience who does not hesitate to use unconventional tools to influence asset and currency prices.
Besant previously described himself as "the country's leading bond seller" and spoke openly about his desire to lower bond yields in order to reduce mortgage and borrowing costs in the US economy.
But these efforts have not gone according to plan, at a time when bond yields are trending higher, mortgage rates are approaching 7 percent, and the budget deficit is stable at about 6 percent of GDP, a level far exceeding Besant's long-term target of 3 percent.
Trying to calm the bond market
The Treasury presented the repo program as a technical measure to improve bond market liquidity, but many Wall Street investors saw it as a clear attempt to achieve Besant's stated goal of lowering borrowing costs.
Indeed, the 30-year bond yield fell by about a tenth of a percentage point in the first hours following the announcement, a large move in a short period of time.
John Briggs, head of US interest rate strategy at Natixis Corporate & Investment Banking, said the timing of the announcement clearly indicated that “officials did not like what was happening,” the Wall Street Journal wrote.
He added that the move, even if the Treasury does not end up buying large amounts of bonds, sends a message that the government can always take further measures to keep yields under control.
“He has great financial experience, and he sees this step as a way to ease pressure on interest rates,” said Steve Moore, a former foreign economic adviser to President Donald Trump, and one of Bescent’s allies.
Bond yields are at the heart of economic policy
The quest to lower bond yields is not limited to Besant. President Donald Trump himself has long been pushing to lower interest rates, in light of cost-of-living pressures, which constituted one of the most prominent motivations for voters.
Trump has repeatedly criticized the interest rates set by the Federal Reserve, calling for them to be lowered.
But the Treasury's ability to influence yields was questioned by many observers; Markets determine bond prices largely according to economic expectations, the path of inflation, and investors' estimates of the Federal Reserve's response to these developments.
In one of his moves to lower yields, Besant led efforts to relax banking rules dating back to the financial crisis; Some officials believed that these rules limit the ability of banks to hold larger amounts of Treasury bonds.
The Treasury also refrained from increasing the sizes of medium- and long-term debt auctions, a move that most analysts believe will eventually be necessary to finance higher government spending.
But yields continued to rise, driven largely by persistently high inflation and stronger-than-expected economic growth. This combination prompted investors to bet that the Federal Reserve's next step might be to raise interest rates.
Can the Treasury compete with the Federal Reserve?
Besnett's moves raised broader questions about the role the Treasury Department has come to play in markets, and whether it is coming close to influencing credit conditions that have traditionally been the purview of the Federal Reserve.
During and after the global financial crisis, the Federal Reserve used asset purchases to calm markets and reduce long-term borrowing costs.
But Besant chooses a different path. Instead of expanding the Fed's balance sheet, the Treasury is seeking to buy back existing bonds, which could ease pressures in the long part of the yield curve.
Becent also intervened twice in the currency markets, buying the Argentine peso and the Japanese yen, in moves that were considered unusual. Because it did not necessarily come within coordinated international efforts.
Some investors say that this policy raises questions about the limits of the Treasury Department’s intervention in the markets, especially in light of the rise in US government debt and increasing borrowing needs.
Limited impact in the face of debt size
Despite the uproar caused by the announcement, some investors doubt the repurchase program's ability to create lasting change in the bond market.
The US Treasury has already been repurchasing old bonds for two years, and the official goal of the program is to support liquidity, not to reduce the yields of new issues, but rather to prevent the rise in yields of old bonds due to their low circulation.
Under the new plan, the Treasury will raise the maximum limit for its purchases of 10- to 30-year Treasury bonds from $2 billion to at least $4 billion per transaction, starting from September 9 until at least November 4.
If purchases continue at the new pace, the Treasury will repurchase about $128 billion of these bonds annually, which is equivalent to approximately 30 percent of the expected issuances for these terms, but it does not exceed 2.4 percent of the total outstanding debt for these maturities, according to Natixis estimates.
“It's just another piece of noise,” said Soren Eriksson, a fixed-income trader at Badgley Phelps. “They do what they can, but how effective are they really given all the other factors in the market?”
Critics believe that the increase in buybacks may be politically motivated, especially with the approaching midterm congressional elections.
Edison Pezica, chief investment officer at Credit Wealth Management, said that the increase in repurchase operations appears political and aims to lower interest rates before the midterm elections, adding that this “raises questions about the credibility of the US bond market,” and may prompt investors to look for alternatives such as dividend stocks.
Conclusion: Besant's move is not merely a technical exercise to improve bond market liquidity; It reflects the Treasury's willingness to use its budget and tools to influence borrowing costs at a time when pressures from inflation, debt, and deficits are increasing. But the bigger question is whether these interventions can reverse the long-term trend in yields, or whether they will only give the market a temporary truce.
The government passenger market in Saudi Arabia is entering a new phase of competition with more airlines joining agreements dedicated to meeting the travel needs of government employees, expanding the base of options available to the government to secure flights, destinations and tickets. The expansion of the circle of carriers competing for passenger orders would give government agencies greater ability to differentiate between prices, services, and schedules, thus supporting the control of spending efficiency and raising the value achieved from the allocations allocated for government travel.
After boarding orders were exclusive to the “General Organization of Saudi Arabian Airlines,” they are now open after “Riyadh Air” and “Flynas” entered this route to compete in providing appropriate prices. This meets the government’s trends in controlling spending efficiency with more options.
Flynas
Flynas, the Saudi economic carrier, announced at the beginning of this month the signing of a unified framework agreement for government passengers with the Spending Efficiency and Government Projects Authority, to provide government travel services (government passenger) within the economic aviation sector for government agencies, for the first time in the company’s history.
The company explained that it is currently working in cooperation with the competent government agencies to complete the technical connectivity work necessary to activate the agreement, noting that it is expected to complete the connectivity and start activating the government passenger service at the beginning of the fourth quarter of this year.
She added that if the technical connection is completed according to the targeted timetable, it is expected that the company’s financial impact of this framework agreement will begin as of the fourth quarter of 2026.
Flynas said, in exclusive statements to Asharq Al-Awsat at the time, that it viewed the signing of this agreement as an important strategic step in the company’s journey, as it opens a new field for growth by providing government passenger services to government agencies, for the first time within the economic aviation sector, and for the first time in the history of Flynas.
She added that the agreement reflects Flynas's ability to expand its customer base and diversify revenue sources, in a way that supports the company's plans for growth and expansion, and enhances the benefit of the expansion of its network of destinations and operational capabilities.
From a financial standpoint, Flynas indicated the expectation that the agreement will have a positive impact on the company’s performance starting from the fourth quarter of 2026, which is the target time to start activating the service after completing the technical connection with government agencies, while emphasizing that the size of the financial impact and its details will depend on the pace of activation of the agreement and the volume of services provided under it.
The company sees this agreement as an important opportunity to enhance the sustainable growth of flynas and support its leadership position in the economic aviation sector, in line with the objectives of “Vision 2030” in developing the aviation sector and enhancing the efficiency and competitiveness of air transport services.
Riyadh Airlines
The “Expenditure Efficiency and Government Projects Authority” recently signed a framework agreement with “Riyadh Air”, the new national carrier of Saudi Arabia, owned by the Public Investment Fund, to join and activate its services within the unified framework agreement for government passengers, in cooperation with the Ministry of Finance, and the “National Center for Government Resource Systems.”
The agreement contributes to expanding the range of travel options available to government agencies and beneficiaries of government passenger services through the “Etimad” platform, which enhances flexibility and efficiency, and provides broader options for government travel.
The joining of “Riyadh Air” also enhances the level of competitiveness among national carriers, which supports increasing seat capacity and expanding the network of destinations and available flight times, in addition to providing greater flexibility in travel options and service packages, in a way that meets the diverse needs of public sector employees and beneficiaries of government passenger services.
Riyadh Air currently connects the Saudi capital with 11 local and international destinations, with ambitious plans to expand its network and reach 100 destinations around the world by 2030.
Chinese markets regained some of their balance, Thursday, with stocks in China and Hong Kong rising, led by the health care and technology sectors, coinciding with the rise of the yuan to its strongest levels in three and a half years. The improvement came in light of the decline of the dollar and the recovery of risk appetite in Asian markets, although caution remains regarding the strength of the Chinese economy and the direction of US monetary policy.
The CSI300 index of major Chinese stocks ended the session up 0.1 percent, after a sharp loss of 3 percent in the previous session, while the Shanghai Composite Index rose 0.2 percent. In Hong Kong, the Hang Seng Index achieved a stronger performance, rising 0.8 percent.
The recovery came as part of a broader wave in Asian markets after the global sell-off in technology stocks. The KOSPI index in South Korea jumped 6 percent, while Japanese stocks rose by about 1.4 percent, which helped restore some confidence to investors after a session characterized by strong selling pressure.
Sentiment also received support from new Chinese companies, including Foxconn Industrial Internet and CCCC Design & Consulting, announcing plans to buy back their shares or carry out purchases, which are steps that investors usually view as an indication of companies’ confidence in their valuations and future prospects.
The healthcare sector was the most prominent market driver. China's CSI for vaccines and biotechnology jumped 9 percent, while the Hang Seng Innovative Medicines Index rose by more than 4 percent. The gains came after “Moderna” and “Merck” announced positive developments in a new field of cancer treatment, which was quickly reflected in the evaluations of biotechnology and health care companies.
On the other hand, technology stocks recovered part of their previous losses. The STAR100 index rose by about 2 percent after falling by 7 percent, while artificial intelligence indicators in Hong Kong rose by 2.3 percent.
But the wave of recovery did not include all high-tech stocks. The shares of the Chinese humanoid robotics company Unitree fell 19 percent, after rising more than five-fold on its first day of trading on the Shanghai Stock Exchange. The decline reflects profit-taking operations after the exceptional jump that accompanied the company's listing, at a time when investors are increasingly sensitive to the high valuations of technology stocks.
In parallel with the improvement in stocks, the currency market provided an additional indication of the ongoing shifts in capital flows, as the yuan in local trading touched the level of 6.7203 yuan to the dollar, which is the strongest since February 2023.
The Chinese currency's rise was mainly due to the weakness of the dollar, which fell 0.8 percent against major currencies overnight, falling to its lowest levels in two and a half months. The decline in US Treasury bond yields contributed to pressure on the US currency after the Treasury Department revealed measures to support the long-term bond market.
But at the same time, the People's Bank of China has shown that it does not want a rapid and uncontrolled rise in the yuan. The bank set the daily reference rate at 6.7808 yuan to the dollar, 612 points weaker than Reuters estimates, in the largest deviation in the weak trend since February.
This step reveals a delicate equation before policymakers in Beijing. A stronger yuan may help reduce the cost of imports and enhance confidence in Chinese assets, but in return it may reduce the competitiveness of exports, which represent one of the important sources of support for the economy in light of continued weak domestic demand.
The most influential external factor remains the course of the dollar and US monetary policy. Despite the Treasury Department's measures to support bond market liquidity, concerns persisted about the US financial situation after the total debt exceeded $40 trillion for the first time.
Gusheng Securities believes that doubling long-term bond repurchase operations aims to stabilize liquidity and send a signal of support to the markets, but it does not address the structural pressures associated with the high fiscal deficit and the increase in long-term debt issuance.
For Chinese markets, the combination of a stronger yuan and a recovery in technology and healthcare stocks provides short-term support for sentiment, but does not eliminate fundamental challenges. The ability of this recovery to continue will remain linked to the performance of the local economy, the direction of the dollar, and US inflation and employment data, which in turn will determine monetary policy expectations in the world’s largest economy.
