Druckenmiller doubts Bessent's bond strategy
Treasury Secretary Scott Bessent’s plan to double bond buybacks has drawn criticism from veteran investor Stanley Druckenmiller, who argues that without fiscal discipline the effort will fail and harm market credibility.
Treasury Secretary Scott Bessent has announced plans to double the department's buyback of longer-dated debt, a move that has already nudged yields lower. The Treasury issued $4.8 trillion of debt in 2025, a figure that could rise this year.
Market Skepticism
Wall Street remains unconvinced that Treasury can steer a fixed-income market that saw $4.8 trillion in debt issued in 2025 alone. Treasury officials said the department could use its $935 billion general account to fund purchases, but the account is a checkbook used for government operations and has limits. The Treasury’s current buyback program, begun two years ago under Janet Yellen, averages $2 billion; Bessent proposes to double it to $4 billion.
| Item | Amount |
|---|---|
| Debt issued 2025 | $4.8 trillion |
| Current buyback program | $2 billion |
| Proposed buyback program | $4 billion |
| General account balance | $935 billion |
Investors can review the latest stats on Treasury debt.
Druckenmiller's Critique
Stanley Druckenmiller, head of Duquesne Family Office and former mentor to Bessent, warned that without fiscal discipline the yield-suppression effort is dangerous. In a Wall Street Journal op-ed titled "Let the Bond Market Speak," he wrote that every basis point of artificial yield suppression is a subsidy to procrastination. He urged Bessent to abandon the buyback scheme announced Aug. 19 and let the market set the proper price for government debt.
"Every rise in yields becomes a test of official resolve," Druckenmiller said. "Governments defending prices against fundamentals always lose. The only variable is how much they spend before conceding."
Treasury's Strategy
Bessent’s plan also included a late-July intervention in currency markets to support the yen, preventing the Bank of Japan from selling Treasurys and potentially raising U.S. yields. The Treasury’s actions have pushed longer-dated yields off recent peaks that were the highest since before the 2008 global financial crisis.
| Yield | Current level | Historical average |
|---|---|---|
| 30-year | 5.16% | 5.16% (50-year average) |
| 10-year | 4.64% | 4.64% (since early 1960s) |
The 30-year bond is only trading slightly above its 50-year average, while the 10-year note trades in line with its long-term average.
Fed's Role
Ryan Swift, chief strategist at BCA, said that if the U.S. government is serious about yield suppression, the Federal Reserve must be involved. He noted that unlike Treasury, the Fed can create reserves to finance purchases. Fed Chairman Kevin Warsh has stressed allowing the market to employ price discovery, and he may avoid commenting on yields to prevent contradicting Bessent’s actions.
The Fed will meet Sept. 15-16, with markets pricing in about a 40% chance of a rate hike, according to CME Group calculations. Warsh will speak at the Fed's Jackson Hole symposium on Friday, where he could address the Treasury issue.
Investors can view the Fed’s rate-hike expectations in the standings.
