Sec. Bessent's big plan to finance the national debt

**SPEAKER_1** (0:00)
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**Kai Ryssdal** (0:30)
The good news is we're going to tell you a story. The bad news is that it's about the bond market. From American Public Media, this is Marketplace.
In Los Angeles, I'm Kai Ryssdal. It is Thursday today. This one is the 20th of August. Good as it always is to have you along, everybody. We're going to go on a little journey to start the program today. An odyssey of sorts. No sirens or cyclops to deal with. Something scarier though, perhaps. The Wall Street Journal's Greg Ipp started our story on Thursday last.

**Greg Ipp** (1:16)
Hey, thanks for having me, Kai.

**Kai Ryssdal** (1:18)
All right. 5.216%.
What was that? What is that?

**Greg Ipp** (1:23)
So Kai, that is the interest rate that the government will be paying on 30-year bonds that were sold at auction today.
And the reason that matters, it's one of the highest rates, in fact, I believe it is the highest rate that the government has said that it will pay on a newly issued 30-year bond in almost 20 years. And I suppose that as taxpayers, that's the kind of thing that's kind of bother us because we have a lot of debt. And every time these rates go up, it means we have to pay even more interest to service that debt.

**Kai Ryssdal** (1:52)
That 30-year yield spent last Friday and on into this week trying to say something to us. Robin Brooks from the Brookings Institution picked up the narration for us on Tuesday.

**Robin Brooks** (2:04)
Of course, 30 years, as you said in your intro, that's a very long horizon. Financial markets over that long horizon, price risk premia for inflation, for policy uncertainty, for the amount of debt that you have. What we've seen the last couple of days and honestly, over the past year is that these long-term yields have risen massively.
Most of all, in places that are highly indebted and or politically dysfunctional, so places like Japan, France, the UK, Italy, and of course, also the United States.

**Kai Ryssdal** (2:38)
The United States, yeah. So of course, I had to ask this super quick, we got like 30 seconds. How worried are you, scale of like one to 10, about the bond, all of this stuff?
Better question, Kai, ask a better question. You know what I mean?

**Robin Brooks** (2:57)
So if you look at the tenure, we're at 4.7, doesn't seem very worrying. It gets more worrying if you look at the 10-year yield 10 years forward, so that's what markets price implicitly in longer term yields 10 years from now, and that's 6%.
On a scale from one to 10, I'm a six or a seven.

**Kai Ryssdal** (3:18)
All right, we'll take a six or a seven for now. Call me when you get to like a nine and then we'll have you back, all right? Thanks for having me on. Robin Brooks, he's at the Brookings Institution, we'll see you. Much like the actual Odyssey, this bond market story is long and it's complicated. Secretary Bessent tried yesterday to prop up the bond market, which meant we had to call Robin Brooks back.
Do you think that Secretary Bessent has solved the underlying problem that you and I discussed yesterday?

**Robin Brooks** (3:47)
So the problem is fiscal policy, right? We have deficits that in a non-crisis period, we don't have COVID, we don't have the pandemic, we have a deficit of 7% of GDP, give or take. And if you want yields to come down sustainably, then that is what you need to rein in. I would call what we're doing now this buyback, I would call it financial engineering. It is really shuffling the deck chairs.

**Kai Ryssdal** (4:23)
I said this to Robin yesterday, and I'm gonna say it again today, because there is a critical balance to be struck here. There are a lot of structural reasons why this economy in particular can handle these higher rates for now. But we took so much time today explaining things again, because believe me when I tell you, this story is a big deal.
The bond market du jour is kind of ignoring the Treasury Secretary trying to talk the long bond off the ledge. And in fact, and this isn't new, Secretary Bessent has been saying he wants to sell fewer of those long term bonds and more short term debt. Marketplace's Justin Ho explains what Treasury hopes that will do and what is likely to actually happen.