BS BULLETIN
- Trump was asked what else could be done about soaring bond yields and answered: “The ultimate intervention is our military.”
- CNN’s Abby Phillip was dumbfounded: “He’s gonna sic the military on the bond market?”
- Behind the bizarre exchange is a serious problem: Treasury’s unusual effort to push yields down has largely fizzled.
President Donald Trump managed to accomplish something Friday that doesn’t happen every day: he made a discussion about Treasury bonds entertaining.
Unfortunately, he also left practically everyone trying to figure out what the heck he meant.
The exchange came as Trump was leaving Joint Base Andrews for South Carolina. A reporter asked whether Trump had ordered Treasury Secretary Scott Bessent to intervene in the increasingly troublesome bond market.
“No, not at all,” Trump answered, praising Bessent as “a very capable man” who has “a good touch” for bonds and interest rates.
The reporter noted that yields had risen again despite Bessent’s intervention and asked whether Trump and his Treasury secretary had discussed another kind of intervention.
“We have many types of intervention. That’s one. The ultimate intervention is our military. And if we have to use that, we will,” Trump replied:
CNN’s Abby Phillip played the exchange on “NewsNight” and looked about as puzzled as somebody who had just been told the 10-year Treasury yield was hiding in a bunker outside Tehran.
“Not sure what that’s about,” Phillip said. “He’s gonna sic the military on the bond market. What is he talking about?”
Fair question. There is, however, a much more serious story underneath Trump’s head-scratching answer.
Treasury surprised Wall Street Wednesday by announcing it would at least double planned purchases of longer-dated government bonds, from $2 billion to $4 billion per operation between September and early November. The goal was to provide liquidity and help calm a market where longer-term borrowing costs have been climbing sharply.
It worked. For approximately five minutes. Okay, slightly longer than that.
But by Friday, Reuters reported that the decline in yields following Bessent’s announcement had largely been erased. The 10-year Treasury yield climbed back to 4.74%, while long-term yields have been pressured by stubborn inflation, America’s ballooning debt and concerns about government borrowing.
And this isn’t just Wall Street inside baseball.
Treasury yields help determine what Americans pay for mortgages and other borrowing. The average 30-year mortgage is already near its highest level in a year. Meanwhile, Washington’s debt has crossed $40 trillion, and the federal government has already spent $931 billion on interest during the first ten months of the current fiscal year — more than it spent on national defense.
Which makes the bond market a considerably bigger problem than one peculiar Trump sound bite. Trump has repeatedly argued that a strong America should result in lower, not higher, interest rates. Earlier this week he complained that whenever good economic news arrives, markets interpret it as a reason for rates to stay higher.
“When our country does well, interest rates should go down,” Trump said.
The bond market apparently did not receive the memo.
MY QUICK TAKE
I’m going to commit an act of heresy here and agree with Abby Phillip: What WAS he talking about?
I have spent enough years listening to Donald Trump to know that sometimes the man begins answering Question A, takes the scenic route through Questions B, C and possibly Iran, and eventually lands somewhere the reporter never knew existed.
But the mental image is magnificent. “Mr. President, the 10-year yield is approaching 4.8%.”
“CALL THE 82ND AIRBORNE.”
Somewhere at the Pentagon, a colonel is staring at a map of Wall Street, asking his staff to locate the enemy position marked BOND MARKET.
But while everybody laughs at the quote, don’t miss the actual story. Washington owes more than $40 trillion; taxpayers are approaching a trillion dollars a year in interest, mortgage rates are climbing, and Treasury just tried an unusual maneuver to push bond yields down.
The bond market essentially shrugged. Forget sending in the Marines. At this rate, somebody may want to send in Dave Ramsey.
DBS WIRE SOURCES:
- Reuters — Trump says he did not direct Bessent to intervene in bond market
- Mediaite — Abby Phillip asks ‘What is he talking about?’ after Trump’s military remark
- Associated Press — Why the bond market is flexing its muscles, and why everyone needs to care
- Council on Foreign Relations — What Treasury’s buyback surprise says about the bond market
- NDTV Profit — Trump: ‘The ultimate intervention is our military’
