On Friday (August 21), during the European session, US long-term Treasury yields almost completely recovered from the losses triggered by the news of the Treasury's expanded repurchase operations. The 10-year yield rose to 4.705%, and the 30-year yield approached 5.253%. The market is testing the effectiveness of Treasury Secretary Bessant's "Bessant option," constructed through repurchases and verbal intervention. However, repurchases are merely a drop in the ocean in a market exceeding $30 trillion; their essence is signaling rather than a structural solution. The key issues remain: massive government spending and rising inflation expectations. Like the Bank of Japan's currency intervention, interventions that do not change the fundamentals can at best provide only short-term respite. Whether the Bessant option can escape the same fate as the yen intervention depends on whether the bond market is willing to challenge this policy signal before the fundamental problems are resolved.

US Treasury yields rebounded, and the market is testing "Bessenter options".

U.S. long-term Treasury yields rebounded in the latter half of the week, almost completely recovering the losses triggered by Wednesday's announcement of the Treasury's expanded repurchase program. The 10-year yield rose to 4.704%, and the 30-year yield approached 5.251%. Market participants are testing the effectiveness of the "Bessant option"—the policy floor established by the Treasury Secretary through repurchases and verbal intervention, and whether the bond market is willing to challenge this signal before the fundamental issues are resolved. After announcing on Wednesday that it would double the size of its long-term debt repurchase program, Bessant further intervened verbally on Thursday, indicating that the repurchase program could exceed $4 billion per tranche. This "policy package" attempted to send a signal to the market, but its effectiveness remains questionable.

Buybacks are just a drop in the ocean; the fundamental problem remains unresolved.

Any Treasury intervention is a drop in the ocean in a market exceeding $30 trillion—it's essentially a signal, not a structural solution. Repurchase agreements can only address the symptoms the market is exhibiting, not the root causes of the current predicament. Two core contradictions remain: high government spending (i.e., massive borrowing) and rising inflation expectations. These two pain points not only drive up US Treasury yields but are also common challenges facing global bond markets. Unless at least one of these problems is resolved, Bessant's intervention can only provide short-term respite at best.

Can "Bessenter Options" escape the fate of yen intervention?

The current state of the US Treasury market is reminiscent of the Bank of Japan's intervention strategy to defend the yen—both involve sending signals through market operations to guide market participants in following policy direction. However, the yen remains under pressure despite continued intervention because the fundamental factors driving its depreciation have not changed. Similarly, if the US fiscal deficit and inflation expectations remain unresolved, the effectiveness of Bessant options will eventually diminish. Gold is benefiting from this shift in the macroeconomic backdrop, but a trend of declining US Treasury yields will not be so simple and direct.

Summarize

US long-term Treasury yields have almost fully recovered from the losses triggered by the Treasury's expanded repurchase program, and the market is testing the effectiveness of "Bassent options." Repurchases are merely a drop in the ocean of a market exceeding $30 trillion; their essence is signaling rather than a structural solution. The two core issues of high government spending and rising inflation expectations remain unresolved, and any intervention can at best provide only short-term respite. Like the Bank of Japan's intervention in the yen's exchange rate, measures that do not change the fundamentals are unlikely to reverse the trend. Gold is benefiting from this macroeconomic backdrop, but a directional shift in US Treasury yields still requires addressing the fundamental issues.