Treasury Whiplash Leaves Traders Guessing Scott Bessent's Next Move

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**Carol Massar** (0:32)
Let's get to what has been the week of whiplash when it comes to US treasuries. I really have focused on rates too around the globe. We've got a great roundtable. Ira Jersey, Bloomberg Intelligence, Chief US Interest Rate Strategist, and Sarah Hunt, Chief Market Strategist at Alpine Saxon Woods, both here in studio. Traders are increasingly questioning what treasury secretary's next move will be. After what's been, I think it's safe to say, we have a turbulent market, bond market this past week.
Sarah, how do you see it?

**Sarah Hunt** (1:03)
I think that it was a surprise that he came out and said, this is what we're going to do in the long end of the curve. I think everyone's been looking at Warsh, Chairman Warsh, and looking at the Fed and seeing what's going to happen with interest rates there. I don't think that people were expecting the treasury secretary to come out and make his own news on this particular front. I think there are, as you can see, quite a lot of questions about one, how this is actually going to work mechanically, two, whether or not this is going to actually help the long end of the curve, which was arguably the idea because you've round tripped that already.

**Ira Jersey** (1:31)
Because it did and didn't. It did and didn't.

**Sarah Hunt** (1:33)
On the other hand, gold is just like, okay, we're gone.

**Carol Massar** (1:36)
Yeah.

**Sarah Hunt** (1:36)
It just is going again today. I think that whether or not the only signal that gold gives is that we don't like anybody else's decisions or it's just a way to play a different angle. I think that you're seeing that reverse in interest rates didn't reverse gold, so that may be an anticipation of further movement.

**Carol Massar** (1:52)
Gold up 5 percent this week. Yeah, we've seen a big move.

**Tim Stenovec** (1:55)
Ira, where do you stand on this now that this is Friday? It's been a couple days. Yields are still moving up.

**Ira Jersey** (2:02)
Yields are kind of flattish from the beginning of the week, so yeah, it did a whole lot of nothing.
Devil is in the details here a little bit, so we won't find out the exact size. He says maybe next week that they'll tell us more information. I did think it was really funny when Scott Bessent said, we're doing this because there's low liquidity in the middle of summer, things like that, but this doesn't start till September 9th. So I'm not exactly sure.

**Vance Howard** (2:26)
That's technically the summer, right?

**Ira Jersey** (2:28)
I guess, but it's not August. It's not now. Yeah, not the summer. And in fairness, I was looking at the depth of the market actually right around the time that he said that. And actually, the depth of the market was not bad. The depth of the market was your typical summerish levels, not insanely low. So it's not like they really needed the direct liquidity support here.

**Carol Massar** (2:47)
I was going to say, political or did the market need this, Sarah?

**Sarah Hunt** (2:50)
So it's interesting. I think that people have been concerned globally about rates rising, especially on the long end. And that's been a problem for investors. It's been a problem for all these companies that are now trying to finance the entire AI build out. Government. So the question is, are we doing something because this exact amount of money is going to make a change or is the fact that we're saying we're going to do something, reminding everyone that the government can come in at any time and change the game. And I think it's a little bit to me of that. I don't know how you feel about that, Ira. But that was my take was a little bit like we're going to do something and not just stand there and let the market figure it out.

**Ira Jersey** (3:23)
Yeah, I think they did this and it was kind of underwhelming, right? It's kind of like the Federal Reserve in December of 2007 when they did a $40 billion program for a $300 billion problem. And so something like that. Maybe there will be a little bit more shock and awe.
But there are risks to what they're doing too, right? Like if they're going to issue a whole lot of T-bills in order to buy back a lot of debt. And let's call this what it is. If it's going to work and if the president and treasury secretary are really serious about getting long end yields down, they have to do this in size. And we have to then call this an operation twist, similar to what the Treasury Department did in the 1960s. And if they do that, the one big risk for them is what happens if the Federal Reserve has to raise interest rates because they're going to be issuing T-bills, which capture that interest rate move almost immediately compared to 30-year debt, which obviously takes 30 years to recapture that new interest rate environment.