US Treasury Secretary Scott Bessent announced this week a significant increase in the scale of long-term Treasury bond buybacks in response to ongoing selling pressure in the bond market. However, Wall Street investors remain doubtful about the effectiveness of this move, believing it fails to address structural issues such as the US fiscal deficit and persistently high inflation.

The US Treasury announced on August 20 that it plans to "at least double" the regular long-term Treasury buyback scale starting next month, raising it from the current $2 billion per month to $4 billion or more. The move is intended to curb the upward momentum of the 30-year Treasury yield, which had hit a 19-year high just days earlier. However, the market rebound was short-lived, with yields climbing again soon after, indicating that investor sentiment has not been effectively alleviated.

In a media interview the following day, Bessent emphasized that the government possesses a "vast toolbox" to address market volatility, stating that current yield levels "do not reflect fundamentals," attributing them to the Iran war and "extremely poor" liquidity in the 30-year Treasury market. He also previewed that the government would announce "greater fiscal consolidation efforts" this weekend or early next week, adding that the peak of the US deficit has "very likely" already passed.

Investors and analysts remain cautious about these assertions. The Chief Investment Officer at Morgan Stanley Investment Management pointed out that understanding a problem and taking effective measures are two different things, noting that the Treasury cannot actually control long-term yields. A strategist at Nomura bluntly stated that the buyback program itself is like a "band-aid" and insufficient to calm market forces.

Some analysts believe that the timing of this action, just two weeks after the Treasury's quarterly refinancing announcement, may undermine the department's credibility due to its suddenness. It is worth noting that Bessent previously criticized former Treasury Secretary Yellen for using increased short-term debt to balance long-term bond issuance, yet the market widely expects he is currently adopting a similar strategy.

The fixed income head at an asset management firm stated that for buybacks to have a more lasting effect, the Federal Reserve would need to coordinate its actions, while deficit management and debt policy must also work in tandem. The nonpartisan Congressional Budget Office projects that this year's budget deficit will account for 5.8% of GDP, matching the 2025 level and far exceeding Bessent's earlier target of reducing it to 3% by 2028.

Some analysts suggest that while the Treasury Secretary's remarks on fiscal consolidation reflect attention to the root causes of high borrowing costs, the government's actual room for maneuver on the deficit issue remains limited. On the other hand, some market participants believe Bessent's intervention has, to some extent, moderated the intensity of the bond market selloff.