U.S. senses crisis over soaring interest rates; also wary of market turmoil originating in Japan

[Bangkok Current Affairs] The Trump administration is becoming increasingly concerned about the sudden rise in long-term interest rates. This is because it will push up mortgage interest rates, weighing on household budgets, and could be a headwind for the midterm elections in November. Treasury Secretary George Bessent is working to allay concerns about the continued rise in interest rates, and is also wary of the possibility that Japan's historically high interest rates could spill over into the U.S. market.

"I can't control the bond market. What I can do is make people stop and think." Bessent said this in an interview with US media this month.

The yield on 10-year U.S. government bonds briefly rose to 5.34% on the 1st, the highest level in 24 years, due to persistent concerns about inflation due to persistently high oil prices due to the deteriorating situation in the Middle East. Amid the artificial intelligence (AI)-related investment boom, aggressive bond issuance by AI-related companies is also fueling the sell-off of U.S. bonds, putting upward pressure on interest rates.

The Federal Home Loan Mortgage Corporation announced on the 8th that the 30-year fixed interest rate for home loans is 7.4%, the highest level in about three years. The burden on household finances is only increasing.

Mr. Bessent is trying to dispel concerns about high interest rates. On the 7th, he told reporters at the White House that the rise in interest rates was because the market had priced in strong U.S. economic growth. ``Once the Iran conflict ends, mortgage interest rates will drop again,'' he said.

However, what the United States cannot ignore is the trend in Japan, where long-term interest rates have reached their highest level in about 30 years. Mr. Bessent is concerned that the "Japan sell-off" of a weak yen and weak bonds will amplify the sell-off of U.S. bonds. At the end of July, together with Japan's monetary authorities, they launched a coordinated intervention to buy the yen for the first time in 28 years. Since then, he has repeatedly made statements urging correction of the yen's depreciation.

On the 15th, a meeting of finance ministers and central bank governors from 20 countries and regions (G20) will be held in Bangkok, Thailand. With the urgency of responding to high interest rates increasing ahead of the mid-term elections, the focus will likely be on communications from the US side.