Bond concerns unsettle Washington

The article reveals the U.S. administration's concern over the rising yields on long-term Treasury bonds, which have reached their highest levels in 19 years, with the yield on ten-year bonds exceeding 4.65%. In an effort to contain the increase in yields, Treasury Secretary Scott Basset has taken several measures, including supporting the Japanese yen for the first time since 1998 and expanding liquidity facilities for foreign central banks, allowing them to obtain dollars in exchange for Treasury securities—thereby reducing Japan's need to sell its bonds. Additionally, the Treasury has adjusted its bond issuance policy, which is considered an indication of reducing the volume of long-term bond issues. However, current debt management tools do not fundamentally address the underlying causes of rising yields, such as the almost two-trillion-dollar annual fiscal deficit and inflation driven by the war with Iran and soaring oil prices, making it difficult to effectively lower yields. Ultimately, the outcome depends on the market's ability to persuade investors that inflation is under control, as yields remain high and continue to impact borrowing costs for households, businesses, and the government.

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