The bond market is driving the Trump administration crazy. Last week, the treasury secretary, Scott Bessent, announced that the government would sharply ramp up its purchase of treasury bonds, in an effort to raise their price and thus push down their yield, which amounts to the interest rate the government pays on its debt.
It didn’t quite work as planned. Yields on treasurys fell after Bessent’s bond market intervention but soon bounced back. By Friday afternoon, the yield on the 10-year treasury was back near where it was before the secretary’s announcement. The yield on the 30-year bond was again trading around its highest level in 20 years or more.
Bessent’s desperation is hardly surprising. The rise in treasury yields since the upsurge in inflation in 2022 has sharply increased the cost of servicing the federal debt, which has ballooned to a record $40tn. This year interest payments will absorb 13.5% of all federal spending, more than defense and up from 5.2% in 2021.
To Trump’s chagrin, higher treasury yields – which set the benchmark for rates on mortgage loans and other long-term lending across the economy – are walloping his popularity, helping freeze the housing market and contributing to the growing realization that he has been a dismal steward of the economy.
An irked president has called interest rates “ridiculous” and “artificially high”, and blamed the Federal Reserve for not cutting them. In one of his most recent signs of derangement, he lashed out against Switzerland for having lower interest rates than the US, pointing out that he had the “absolute right” to cut off all US business with the country. And he hinted at a novel approach to monetary policy, suggesting that “the ultimate intervention is our military”.
But treasurys’ persistent weakness raises a more broadly unsettling prospect for the global economy: the end of the era in which the United States provided a more or less universally accepted safe, liquid asset for investors, companies and governments around the world to store their wealth.
Between the turn of the century and the Great Recession, foreign central banks increased their holdings from about 20% to more than 30% of all treasurys outstanding, as they built reserves to ward against speculative attacks or tried to manage their exchange rates. Foreign investors also piled in. By 2008, over half of all treasury bonds were in the hands of foreigners.
US government bonds were considered such a solid place to store money that their price would rise (and their yield would fall), any time a crisis struck, sending investors scurrying for safety. This was true even when, as during the collapse of the housing bubble in the US in 2007, the crisis was sparked by a mix of financial exuberance and inept policymaking in the United States.
The pillars supporting the treasury market have been weakening for some time, however. Foreign central banks – mainly in China and Japan – have sharply pared back their holdings. Private foreign investors have picked up some of the slack. By mid 2025, private foreign investors held $7tn in treasurys, almost twice as much as the $3.9tn held by foreign official entities. Still, the foreign share of treasury holdings has fallen by 10 percentage points over the last two decades or so, to about 40%.
The new buyers of treasurys come with new risks. Unlike foreign official entities, which hold the bonds to ensure financial stability, private investors seek returns. They will sell to make a buck. Their rising footprint has turned the treasury market into a more volatile place than it used to be.
The main threat to treasurys’ status as the paramount store of value in the world, though, comes from within. The supply of treasury bonds has been growing at a fast clip in recent times, to fund a budget deficit that is now hovering at about 6% of GDP. Supply has outpaced demand. These days, US government debt no longer has the top rating from the big credit rating agencies and must offer a higher yield than that of many other affluent nations.
Add in the increasing mistrust of Trump’s reckless economic governance and you have the makings of a problem. In the Trump era, treasury bonds no longer rise as they used to in moments of high risk. When Trump unleashed his volley of tariffs against everybody on “Liberation Day” in April last year, investors dumped treasurys just as they would a lowly emerging market bond.
Bessent knows this poses a problem for the government. Funding the deficit requires adding some $10bn a day, net, to the mountain of treasurys on the market. But it also poses a potential problem to investors and governments in the rest of the world. They all learned to trust treasurys as a bedrock asset in which to store their wealth, a perfect complement to the dollar as the main mode of exchange for trade and investment around the world. What will they do without it?
Like Nato trying to convince Trump to stay or the World Trade Organization working to restore its relevance since the US left, financial leaders don’t yet know quite how to cope with the seemingly inevitable demise of the American safe haven. Indeed, treasurys maintain what is left of their status largely because it has not been easy for foreign countries and businesses to find somewhere else to keep their stash.
But the search is on. Bessent will have to do more than repurchase a few billion worth of treasurys to overcome mistrust in America’s Loony Tunes leader and ensure that there is sufficient demand out there to match the massive supply coming down the pike.