Global Bond Market Slumps as U.S. Treasury Announces Buyback Plan

David Haggith

The question of whether the market was seeing the start of a global bond crash or something less severe answered itself overnight. The U.S. Treasury made clear that the move in bonds was serious when it unveiled a major rescue plan that echoes an old Federal Reserve form of quantitative easing.

I will need to cover the broader bond collapse in a deeper analysis because of its breadth and depth, but the basic outline is already visible. The Treasury announcement amounts to a form of the Fed’s former Operation Twist, one of former Fed Chair Ben Bernanke’s tools of quantitative easing. That program, first used in the early 1960s and revived by the Fed in 2011 and 2012, sold shorter-dated securities and bought longer-dated ones with the stated aim of lowering long-term borrowing costs — the same maturity-swap mechanics the Treasury now plans to run on its own debt.

Because bond yields on the U.S. 30-year Treasury rose sharply this week, Treasury Secretary Scott Bessent, appointed by Trump, said the Treasury will begin large-scale buybacks of its own bonds in longer-dated maturities. Those purchases will be financed by issuing large amounts of shorter-term Treasuries with lower rates. The intended effect is to reduce long-term borrowing costs by lowering yields at the long end of the curve while increasing supply at the short end. Unlike Fed quantitative easing, which created new money to expand the central bank’s balance sheet, the plan as described changes the maturity mix of the debt rather than its total size. The Treasury has repurchased its own securities before, running a debt-management buyback program in 2000–2002 and resuming regular buyback operations in 2024 that officials framed as routine liquidity and cash-management tools rather than rescue measures. The Treasury’s quarterly refunding announcements, which set out issuance plans across maturities along with the size of any buyback operations, are where the scale of the new program would be spelled out.

Out of the mouths of babes

Even CNBC’s Jim Cramer, whom Haggith describes as a frequent stock-market cheerleader, acknowledged the problem. In Haggith’s summary of Cramer’s remarks, the message was simple: stop the rescue operations and let markets be markets.

A summary of Cramer’s view states that aggressive Treasury purchases can distort markets, inflate bubbles, and obscure the economy’s true condition. He argued that markets should be allowed to operate with less intervention so growth can remain sustainable and unintended consequences can be reduced.

Haggith says that is a view he has argued for since the Great Recession. In his account, repeated bailouts have only encouraged larger cycles of crisis. Rather than allowing failed structures to collapse, policymakers have repeatedly stepped in, creating what he sees as moral hazard and bigger future bubbles.

He argues that markets follow the money, and the biggest players are often the Federal Reserve and the Treasury. Because both can inject large amounts of liquidity into the system, he says investors increasingly trade around expected government action rather than fundamentals.

That dynamic helps explain why stocks rose even after the bond-market turmoil. Haggith says the Treasury’s move signaled a new wave of money entering the system, which pushed Treasury yields lower and helped support risk assets.

A pattern of escalating rescues

Haggith says the current response reflects a long-running pattern. In his view, rescues during the Great Recession, and later during the 2019 repurchase-market stress episode, were followed by even more intervention when the initial measures failed to solve the underlying problems.

He argues that this cycle has built the largest bond crisis in history and that the global dollar system is now at stake. Because the dollar is heavily influenced by bond-market operations, he says the Treasury’s rescue is aimed not only at managing U.S. borrowing costs but also at stabilizing the broader dollar system.

He also notes that the bond vigilantes, a term for investors who push back against easy financing conditions, have been repeatedly subdued by policy action. But he says those policy tools do not last forever and tend to require ever larger doses to keep the system calm.

Back to abnormality as the new normal

Haggith says it is not normal for Treasury rates to fall after a major bond-market shock, especially one involving a market as closely tied to U.S. Treasuries as Japan, the largest foreign holder of U.S. government debt. He argues that the Treasury’s rescue would normally unsettle investors, but the scale of intervention may be large enough to outweigh the risk for now.

Still, he says bond investors are now realizing that conditions are as bad as feared, even if the Treasury has stepped in to suppress yields. He compares the current moment with 2008, when large-scale easing became the norm for years, and with 2019, when the Fed returned to quantitative easing after a brief period of quantitative tightening.

In his view, the pattern is always the same: policymakers do more, then must do even more. He says the latest rescue is likely the beginning of another extended round of intervention.

He also points to a broad selloff in global bonds and a corresponding collapse in the housing market. The link is direct for American borrowers: 30-year mortgage rates are priced off long-term Treasury yields, so pressure at the long end of the curve feeds into home-financing costs. If prices are allowed to fall, he says, first-time homebuyers may eventually benefit. But he believes policymakers will likely intervene before the decline becomes severe enough to trigger bank failures.

Broader pressures across markets

Haggith says the Treasury’s emergency response is not limited to U.S. debt markets. He points to concerns over Japan, other fragile bond markets around the world, and the effect of geopolitical tensions on financial confidence. He also says the day’s developments coincided with the U.S. national debt topping $40 trillion.

He lists a wide range of related headlines, including:

• more coverage of a coming food crisis;
• an article about the U.S. confiscation of Venezuela’s gold held at the Bank of England;
• new restrictions on fuel purchases in Russia amid shortages;
• a renewed tariff dispute with Canada;
• Iranian threats to widen the war to Europe;
• continued Ukrainian attacks on Russian refineries;
• a projected three-year high in U.K. energy bills;
• Murban crude rising to a four-month high;
• Iran calling Trump “delusional”; and
• reporting on why Japan is leading the global bond selloff.

He also quotes Bill Bonner, who described the current debt burden as a “SuperBubble,” noting that U.S. debt has risen from about $10 trillion in 2008 to nearly $40 trillion today, while annual debt-service costs have climbed to $1.3 trillion from less than $200 billion in 2008.

Haggith says the scale of the current bond-market breakdown is a direct consequence of earlier bailouts. In his view, those rescues did not fix the underlying weaknesses in the financial system and instead made the next crisis larger.

He closes by saying Republicans have stopped talking seriously about the national debt because they either were never serious about reducing it or now recognize there is little left they can do about it. In his assessment, the system has passed the point of no return.

About the author

David Haggith

David Haggith is the publisher and editor-in-chief of The Daily Doom, a non-partisan daily collection of economic, social, and political news from around the world, along with daily editorials.

Liked it? Take a second to support David Haggith by subscribing on Substack.