Last week, US Treasury Secretary Scott Bessent announced that the government would significantly increase its purchase of treasury bonds. This action was intended to raise bond prices and consequently reduce their yields, which represent the interest rate the government pays on its debt.
However, the intervention did not achieve its desired outcome. While treasury yields initially fell after Bessent's announcement, they soon recovered. By Friday afternoon, the yield on the 10-year treasury bond was close to its level before the secretary's statement. The yield on the 30-year bond was trading around its highest point in two decades or more.
The rise in treasury yields since 2022 has substantially increased the cost of servicing the federal debt, which has reached a record $40tn. This year, interest payments are projected to account for 13.5% of all federal spending, an increase from 5.2% in 2021 and now exceeding defence spending.