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Scott Bessent notes stable US 10-year term premium despite market pressure on long-term bonds

Treasury Secretary Scott Bessent stated that the US 10-year term premium has remained basically unchanged over the past 12 months. The New York Fed’s measure of this premium indicates that the market has not seen a significant deterioration in how it prices US fiscal sustainability or Fed credibility during this period. While the US term premium currently sits below those of Japan and Germany, the market appears less concerned about the US fiscal situation than those countries. The administration announced a plan to buy back more than $4 billion in long-term debt in a single operation if necessary, a move intended to contain yields. However, investors reacted by raising yields on 30-year securities to 5.25% the day after the announcement. Scott Bessent also mentioned the possibility of preparing a fiscal consolidation plan with the involvement of President Trump. The administration does not support tax increases, so the focus may fall on spending cuts. Additionally, Scott Bessent noted that the United States intends to impose unprecedentedly tough sanctions on Iran, which may impact global markets and oil prices.

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