The rise in interest rates hit a 'raw nerve' at the White House. Bessent's plan has analysts on edge.

By Victor Reklaitis and Greg Robb

The level of buybacks per operation could be bigger than $4 billion, while the Treasury secretary said the White House will focus on cutting the deficit

U.S. Treasury Secretary Scott Bessent made waves this week with his plan to at least double his department's buybacks of longer-dated Treasury bonds.

U.S. Treasury Secretary Scott Bessent on Thursday doubled down on his department's intervention in the bond market, saying the Treasury could make additional moves and that its buybacks may be bigger than what was announced a day earlier.

Bessent also announced a new focus by the Trump administration on addressing the national debt, which has just topped $40 trillion.

The Treasury secretary was asked in a CNBC interview how much more he's willing to do following his department's announcement on Wednesday that it would at least double the size of its buybacks of longer-dated Treasury bonds

"We have a big tool kit, so we'll see," Bessent responded. "Part of it is signaling here, and to show that we believe that the yields don't reflect the underlying fundamentals."

Bessent stressed that the buyback operations could be bigger than the per-operation volume of at least $4 billion announced on Wednesday. "I would note that it could be more than $4 billion per issue," he said.

The Treasury secretary's comments show that the recent spike in rates at the long end of the bond market has "hit a raw nerve" in the White House, said Chris Turner, a markets strategist for ING. Bessent is "looking to put a remedial plan in place," Turner told MarketWatch in an email.

The Treasury Department on Wednesday framed its move as driven by "a desire to provide greater liquidity support," but the step has been widely viewed as a push to stop yields from surging.

Analysts on Thursday said Bessent "doubled down" on the notion of a sea change in Treasury debt management when he described his plan as "Treasury twist."

Many analysts have said Treasury's intervention in markets is a temporary Band-Aid that doesn't get at the growing national debt and annual deficits that provide the underlying reason for the spike in long-term rates.

As part of his remarks on Thursday, Bessent announced that the White House would begin a new focus on lowering deficits, which would be led by President Donald Trump.

"In the administration, we are announcing probably at the end of this week, beginning of next week, an increased focus on fiscal consolidation, and it's coming from President Trump. Russ Vought and myself will be examining both on the revenue side and the cost side what we can do," Bessent said, referring to the head of the White House's Office of Management and Budget.

At the same time, Bessent made an effort to talk up the federal government's financial picture.

"There's nothing magic about the $40 trillion number, and we can grow our way out of that," he told CNBC. The former hedge-fund manager said there was fiscal consolidation in the 2025 calendar year, so the deficit dipped to 5.7% of U.S. gross domestic product. He added that big tariff refunds have been adding to the government's red ink, but "we won't have to do that again."

Jill Cetina, a finance professor at Texas A&M University and former Federal Reserve official, said she welcomed Bessent's "new message" about deficit reduction, but added that he undercut his announcement by repeating his "old message" that the U.S. economy could grow its way out of its deficit problem.

U.S. bond yields BX:TMUBMUSD10Y were rising on Thursday. Long-term bond rates had declined in the immediate aftermath of the Treasury's announcement on Wednesday, but have since retraced their move.

While taking questions from reporters outside the White House on Thursday, Bessent dismissed that retracement.

"Anything that happens within a 24-hour period is noise, and I think that once the market understands that we are focusing on fiscal consolidation, and that we are trying to bring the market back into equilibrium in a thinly traded market, I think, you know, I'm confident that bonds will continue declining," Bessent told reporters.

The Trump administration's new focus on deficits makes sense given the skepticism around Bessent's buyback moves.

Jim Bianco, president of Bianco Research, said the buyback plan wouldn't work even with Bessent's pledge to do more. "The problem with yields isn't the tool kit. Excess government spending is contributing to keeping core inflation above 3%. That's what we need to address," Bianco said.

Under the original Treasury approach to buybacks, the department would buy "off the run" long-term securities that don't trade, and replace them newer long-term securities that are traded. Now, per Bessent's plan, the department is going to buy back long-run Treasurys and pay for it by increasing the issuance of Treasury bills - "twisting" the yield curve in the process.

Mitch Daniels, who was director of the Office of Management and Budget for President George W. Bush, said the aim of Bessent's plan could be to keep rates from rising into the upcoming midterm elections.

"Someone said it looks like panic - maybe it is. It won't make much real difference," Daniels said in an interview on CNBC.

-Victor Reklaitis -Greg Robb

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08-20-26 1409ET