The 30-year US Treasury yield has spiked to levels unseen since 2007, sending alarm bells through financial markets. Investors, grappling with persistent inflation worries and a wave of corporate bond issuance, are demanding heftier risk premiums before funding Washington's ever-growing debt pile. In response to these runaway borrowing costs, the US Treasury announced an emergency plan on Wednesday to at least double its debt buyback operations from September 9th through November 4th. Treasury Secretary Bessent followed up on Thursday with a public commitment to scale up efforts to repurchase expensive debt, revealing that a fresh fiscal blueprint is on the horizon to confront the steepest borrowing expenses in years. This intervention, however, has quickly drawn sharp criticism from Wall Street.
JPMorgan has leveled pointed questions at the Treasury's tactic of buying long-term bonds while issuing short-term bills. James Sullivan, co-head of global fundamental research at the bank, said in an interview on Friday that such measures provide only temporary relief without addressing the underlying debt burden. He illustrated the dilemma with a vivid analogy: "This is a bit like paying off a mortgage with a credit card. It might work for a while, but eventually the mismatch starts to become more apparent." Sullivan noted that government attempts to control markets rarely end well. At the core of the problem lies a colossal and ever-expanding mountain of debt—US government obligations now stand at roughly $40 trillion, with developed nations worldwide shouldering a combined $76 trillion. Even with a robust economy, the sheer surge in bond supply is enough to rattle markets, as all this debt must eventually find a buyer.
The supply-demand equation for Treasuries is becoming increasingly complex as some traditional buyers step back, forcing issuers to offer more attractive yields. Demand from foreign official buyers has also weakened, with foreign government holdings of US debt hitting a 14-year low. Meanwhile, a powerful borrowing wave is sweeping from sovereigns to corporations, driven by AI infrastructure, manufacturing reshoring, and national security-related investments that are making growth more capital-intensive. Sullivan's data shows leading AI firms have already issued a staggering $200 billion in debt this year, up 80% from the same period last year. Massive spending on data centers and computing power is intensifying competition for capital, directly impacting market valuations. JPMorgan's analysis reveals that bond yields have now climbed above the earnings yield of the S&P 500 index, a situation Sullivan describes as making cross-asset allocation decisions exceedingly difficult.
Goldman Sachs echoes JPMorgan's structural concerns, casting doubt on the Treasury's short-term maneuvers. Strategist Friedrich Schaper argued in a report that without changes to the underlying macro drivers, the expanded buyback program will prove "relatively short-lived" in its impact. While the Treasury tries to rein in rising borrowing costs, Schaper believes cooling inflation remains the most convincing pathway to lower bond yields. Recent fundamental data—including weaker-than-expected retail sales, disappointing jobs figures, and subdued core inflation in July—has been encouraging, yet market pricing remains divided. Investors are still placing relatively more weight on upside risks to Treasury yields. To break this impasse, Schaper offers a clear prescription: "We believe that a sustained accumulation of moderate inflation data will increase confidence in the Fed holding its rate benchmark steady and shift the risk bias back, which is the clearest route to lower yields at this point."
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