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Hi Reader,

Happy Friday! Note to self: do not become the richest man in China. Never ends well.

In today's newsletter:

In-depth: Why did the US Treasury intervene in bond markets? And why didn't it work?
Newsbites: UK inflation up, asking prices down, and a cure for cancer.
PensionCraft News: How the wealthy invest, governments vs currency markets, and the Japan carry trade and your portfolio.

IN-DEPTH

Comic Timing: Bessent’s Bond Buyback

They say comedy is tragedy plus time. But the formula is famously vague about exactly how much time. A sensible working estimate is decades for wars, years for divorces, and a fortnight for haircuts. This week the bond market established a new lower bound: slightly under twenty-four hours.

The tragedy, in this instance, is the cost of long-term borrowing, which is rising everywhere at once. Last week the US Treasury sold $25bn of 30-year bonds at 5.216%, the highest auction yield since 2001. Germany's 30-year bund reached 3.78%, a 15-year high. France's long bond hit levels last seen in 2008. And the 30-year gilt — never one to sit out a rout — is roughly where it was in 1998.

On Tuesday the US 30-year touched 5.33%, its highest since June 2007.

This was the point at which US Treasury Secretary Scott Bessent had seen enough. The Treasury announced it would at least double its regular buybacks of 10 to 30-year debt, from $2bn to at least $4bn per operation — tearing up a buyback schedule it had published just a couple of weeks earlier.

Bonds rallied, with the 30-year yield dropping sharply to 5.20%.

Now for the comedy. Within a day the move had fully unwound, as yields climbed back to where they’d sat before the announcement.

Bessent appeared on CNBC — entirely unruffled — to argue that the market had “gotten a little ahead of itself” and that “yields don’t reflect the underlying fundamentals.”

Buying time

What is Scott Bessent actually attempting here? Lower yields, obviously — but does he have the firepower? Four billion dollars sounds like a lot of money, but it’s a drop in the ocean compared to the $32 trillion Treasury market.

Let's be clear about what the buyback programme is and isn't. It's not quantitative easing — no new money is magicked into existence. And it certainly isn't a debt paydown. The mechanics are simple enough: the Treasury buys old, illiquid long bonds and funds the purchase by… well, it didn't say. Everyone assumes it will issue short-term bills to balance the books.

Interestingly, gold jumped 4%, suggesting the market viewed this as a step towards financial repression. The dollar also weakened. If rates aren’t allowed to adjust, something else will act as a pressure valve.

Nobody's buying it

None of this is new. Bessent criticised his predecessor Janet Yellen for this exact manoeuvre. But Treasury secretaries always say the same thing: we are absolutely not putting our thumb on the scale, we are merely ensuring there is sufficient liquidity. That remains the official line, with Bessent explaining that "liquidity, especially at the 30-year point, is very poor." Wink wink.

Bessent is getting a taste for intervention. Earlier this month the former hedge fund manager joined Japan in propping up the yen — by selling euros rather than dollars. If that spared Japan from selling down its enormous stockpile of US Treasuries, well, that’s just a happy accident.

He also hinted at further intervention to come, saying the US Treasury has a “big toolkit” and goading the market to call his bluff.

“People have bad information. I have asymmetric information, so I think that the market should think, well, why would we have joined the Japanese in the intervention at this time? Do we know something the market doesn't know, in terms of being willing to do what I would call a Treasury twist here in terms of the bond market? What do I know that the market doesn't know?” — Scott Bessent (with smug levels dialled up to 11)

But repeated interventions aren’t a good look. Nothing projects confidence in your bond market quite like an emergency programme to support it.

The expanded bond buybacks run from 9 September to 4 November. Coincidentally, the midterms are on 3 November. The interventions wind down the day after the election — another happy accident.

Tough crowd

Buybacks do help liquidity, making bonds easier to trade. But the long bond isn't particularly hard to trade anyway; it's hard to love.

The reasons aren’t mysterious. The US national debt reached a record $40tn this week, and the budget deficit is expected to come in around 6% of GDP again this year — despite Bessent's pledge to bring it down to 3% by the end of Trump's term. It's hard to economise when the boss is in a spending mood: the tax cuts have been extended, and defence spending is supposed to rise by more than 50% to $1.5tn a year. Undeterred, Bessent declared this week that there's a "very good chance" the deficit has peaked.

And the government isn’t the only one tapping the bond market in size. The AI hyperscalers are competing for the same pool of capital — Alphabet, Amazon and Meta have issued nearly $220bn of bonds so far this year, more than double their total for the whole of 2025.

The world's savers are being asked to finance both the state and the singularity, and they have, reasonably enough, put their prices up.

“There's been a lot of corporate issuance that's influenced the market.” — Scott Bessent

Meanwhile, the Iran war continues to stoke inflation fears, with Brent crude back above $90 a barrel. And the new Fed chair, Kevin Warsh, hasn't helped, declining to offer forward guidance or say much about how he'd respond if inflation doesn't subside. (Though in fairness, no guidance at all is arguably preferable to the Treasury's approach of publishing guidance and abandoning it a fortnight later.)

None of which makes US government debt any easier to love.

Laughing stock

You might look at that mountain of debt and reasonably wonder if it’s a ticking timebomb under the economy. Undoubtedly, debt as a share of GDP can’t go on growing forever. The disagreement is over when it becomes a problem, and the honest answer is that nobody knows.

Let’s revisit our formula and solve for t.

Time = Comedy − Tragedy

Which suggests the debt remains sustainable for exactly as long as the situation remains funnier than it is tragic. On current form, the comedy is holding up well — US politics has spent a decade hitting new all-time highs, and this week President Trump went on an amusing ramble about how America would have 10x the economic growth if the bond market would just leave them alone. But the tragedy is compounding at roughly $2 trillion a year. It won’t be funny forever.

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NEWSBITEs

UK inflation rose to 2.9% in July, while employers kept shedding jobs. The 13% hike in Ofgem's price cap did the damage, with gas prices up 14.7%, their biggest jump since October 2022. Meanwhile, payrolls fell 94,000 YoY and vacancies slid to 707,000—the lowest since 2014, pandemic aside. As I always say, I'm an optimist about the UK. Despite everything.

Asking prices for UK homes posted their biggest August fall since 2018. Rightmove's average newly-listed price dropped 2% to £364,999, with homes for sale at a 12-year high. Rightmove cut its 2026 forecast from 2% growth to between 0% and -2%. Of course, your house is different. Everyone's is.

Japanese core inflation accelerated in July, teeing up another rate rise. Core CPI rose 1.8%, up from June's 1.6%, as firms passed on import costs from a weak yen and higher fuel prices. The Bank of Japan is widely expected to lift rates to 1.25% next month. Which is big in Japan.

Moderna's share price more than doubled on a successful cancer vaccine trial. Its personalised mRNA jab cut melanoma recurrence risk in a Phase 3 trial of over 1,100 high-risk patients—the first late-stage win for any mRNA cancer therapy. Its shares closed up 177% in a day, but remain more than 60% below their 2021 pandemic peak. Still, quite the shot in the arm.