'It's fair to say that at some point - at some time - there will be a crisis,' says billionaire John Arnold, a former star Enron trader and the founder of philanthropy Arnold Ventures

The Treasury Department's efforts to calm the bond-market selloff haven't yet worked as well as hoped.

You can't just sweep $40 trillion in U.S. national debt under a rug and forget about it.

That's the bond market's message to Treasury Secretary Scott Bessent in recent days, following his sudden efforts to calm an alarming selloff in long-term U.S. government bonds that recently pushed yields up a two-decade high.

Bessent outlined plans to buy more long-dated Treasurys this fall, promised to use the agency's large "tool kit" to support the market and talked of coming new measures to contain the growing U.S. debt load. On Monday, news reports indicated the Treasury could finance increased buybacks through its general account.

But the question for traders still is whether anything will get done to manage America's growing debt pile, or if the bond market ends up calling the shots.

"It's fair to say that at some point - at some time - there will be a crisis," said John Arnold, a billionaire former Enron energy trader and the founder of philanthropy Arnold Ventures.

This summer's bond-market tumult might end up being yet another "blip that quickly stabilizes," Arnold told MarketWatch. But his bigger worry is that a lack of change in the U.S. fiscal picture will persist - until it triggers a crisis.

The long end of the Treasury curve has been uncomfortably elevated heading into September. The yield on the 30-year Treasury bond BX:TMUBMUSD30Y was at 5.24% Monday, still near its 19-year high. The 10-year Treasury yield BX:TMUBMUSD10Y was at 4.71%, near its one-year high, according to Dow Jones Market Data. Bond prices and yields move in opposite directions.

"I'm nervous, because Bessent failed to cap long-term Treasury yields," said Tracy Chen, portfolio manager at Brandywine Global, on Friday. "The bond-market behavior shows that the bond vigilantes still don't believe him."

The fight over the bond market isn't only a Wall Street story. Longer-term Treasury yields set the floor for what Americans pay to borrow on mortgages, car loans and credit cards. When yields climb, so does the cost of nearly everything people finance. And when Washington can't hold those yields down, the government pays more to borrow money. High costs also ripple out to the entire economy, making everyday loans much more expensive for regular people.

That's what makes the promise of increased Treasury buybacks through November, and other potential "tools," more than technical maneuvers. They are signals of how much control Washington wants to exert over the cost of borrowing, for the government and everyone else.

"I think more needs to happen here - and more is likely to happen," said Dustin Reid, chief fixed-income strategist at Mackenzie Investments, as yields drifted higher Friday. "It's a long way until November," he added.

To be sure, the Treasury's buybacks can help ease pressure in the bond market by improving liquidity, but they won't address the core issue: The government still has to finance a massive and growing debt load. Buying back long-dated bonds would likely be financed with more short-term Treasury bill issuance. And the nearly $1.8 trillion federal budget deficit so far this fiscal year only reinforces the borrowing need.

Chen at Brandywine thinks Bessent will need to do more to convince investors that the Trump administration is getting serious about tackling U.S. fiscal issues, but acknowledged that talk of increasing revenue through taxes or austerity ahead of the midterm elections in November would be unpopular.

As it stands, net interest payments on the national debt are expected to surpass $1 trillion for the 2026 fiscal year - and climb thereafter. At the same time, higher oil prices (CL00) (BRN00) and more military spending brought on by the Iran war have fueled renewed inflation anxiety, while uncertainty over future monetary policy under new Federal Reserve Chairman Kevin Warsh has added uncertainty in the market for longer-dated Treasurys.

And here's where things get interesting: Bessent's Treasury Department wants lower yields, but Fed Chairman Warsh thinks markets should help guide policy. So, the Treasury's larger buyback plan could create an awkward backdrop for this week's annual Jackson Hole Economic Policy Symposium, where central bankers typically signal any big shifts in policy.

"In some ways, the Fed and Treasury are saying different things," said Reid at Mackenzie Investments. "The Treasury is saying there's a liquidity problem at the back end of the curve, and the Fed's Warsh is saying: 'We want the market to tell us what's being priced in and what to do next.'"

Anything Warsh may say at Jackson Hole about persistent inflation, the recent rise in long-term yields or the future size and role of the Fed's balance sheet could trigger "a meaningful repricing across Treasurys, the dollar DXY, gold (GC00) and stocks SPX DJIA COMP," said Daniela Hathorn, senior market analyst at Capital.com.

-Joy Wiltermuth -Isabel Wang