Backfire: Trump’s buyback scheme flops as bond market panics

After a week of trying to soften his own debt problems, President Donald Trump’s ploy to reduce inflation's impact has only intensified a selloff that pushed borrowing costs to multiyear highs, reports Bloomberg.

Trying to staunch the nation’s ballooning long-term borrowing costs, Trump’s Treasury Department on Thursday purchased $5.19 billion of debt maturing in 10 to 20 years. But market investors scrutinized the purchases, reports Bloomberg.

“That news took investors by surprise and temporarily helped long bonds rally, though they’ve since reversed those gains,” Bloomberg reported.

Investors and analysts saw the move as “a reflection of the Trump administration’s unease over the rise in long-term borrowing costs with weeks to go before the November congressional election,” said Bloomberg, and the rise in Treasury yields has “sent U.S. mortgage rates climbing to the highest level in more than a year.”

Worse, Thursday’s buyback resulted in disappointment among market participants, who then pushed U.S. yields even higher after the scheme was unloaded.

“Also pressured by oil prices and a deluge of fresh issuance, yields were up eight to 13 basis points across maturities — with much of the rise seen earlier in the New York trading session. The 30-year benchmark hit levels last seen in 2007, and the two-year note yield exceeded 4.5 percent for the first time since 2024,” Bloomberg reported.

Trump and his Treasury Secretary Scott Bessent are up against a market that is already pushing interest rates to painful new highs as the cost of the nation’s rising debt under Trump’s two presidential terms makes home, car and credit loans more costly. Reuters reports U.S. debt rose by $11.6 trillion during Trump's two terms in the White House, meaning Trump accounts for slightly more than 25 percent of the nation’s $40 trillion debt load.

Trump’s biographer Richard Wolff said the U.S. national debt is now “one of the many signs of an economy and of an empire that is now in decline. There is an enormous increase in defense spending, or now war spending, that is scheduled, and no comparable increase in revenue.”

Wolff said a global selloff of U.S. government bonds also meant increasing borrowing costs for everyday consumers. This concern may reflect the administration’s new buyback policy and a more activist style of US debt management that contrasts with the department’s long-held mantra of being “regular and predictable,” according to Bloomberg. But it appears the White House is willing to make unprecedented moves to deal with Trump’s bloating debt.

“It’s like Treasury created this monster that it now has to keep feeding,” said Steven Zeng, a strategist at Deutsche Bank AG.