Trump Denies Directing Treasury to Intervene in Bond Market Amid $4 Billion Buyback

Donald Trump, the President of the United States, stated that he did not instruct Treasury Secretary Scott Bessent to intervene in the bond market. The U.S. Treasury has increased the scale of its buyback of long-term bonds, with a minimum of $4 billion (approximately 5.544 trillion won) per session, leading to mixed interpretations in the market regarding liquidity support and long-term interest rate management.

Reuters reported that President Trump responded "absolutely not" when asked by reporters on the 21st if he directed Secretary Bessent to intervene in the bond market. Trump mentioned that Bessent "did it because he wanted to" and called him "a very capable person."

The controversy stems from the Treasury's expansion of its long-term bond buyback. The Treasury has raised the scale of buybacks for nominal bonds maturing in 10-20 years and 20-30 years from $2 billion to a minimum of $4 billion (approximately 5.544 trillion won) per session. The applicable period is from September 9 to November 4, 2026.

On August 5, the Treasury announced its buyback plans for the quarter during its fiscal financing announcement. The Treasury stated that it plans to purchase up to $38 billion (approximately 52.668 trillion won) of off-the-run bonds for liquidity support and up to $25 billion (approximately 34.65 trillion won) for cash management purposes in the 1-month to 2-year maturity range.

Off-the-run bonds refer to government bonds that were issued previously and are traded, rather than newly issued benchmark securities. Typically, they are less actively traded than new benchmark securities, which can weaken price discovery and trading conditions. The Treasury's buyback serves as a debt management tool to bolster liquidity in this segment.

From an official standpoint, this action is not a monetary policy. It is not a way for the central bank to change the path of the benchmark interest rate by supplying new money; rather, it is a structure where the Treasury buys back government bonds that are already circulating in the market. However, due to the fact that the expansion targets long-term bonds of over 10 years, the market interprets it as an intention to stabilize interest rates.

The market reaction was immediate but did not last long. Reuters reported that the yield on 30-year bonds fell by about 10 basis points immediately after the announcement, but most of the decline was reversed afterward. Separate market reports also confirmed that the yield on 30-year bonds rose back to around 5.25%.

This indicates that while the buyback expansion acted as a short-term signal, it was not perceived as a solution to reduce structural pressure on long-term interest rates. Long-term bond yields reflect a combination of fiscal deficits, inflation expectations, long-term bond supply, and corporate bond issuance demand.

AP highlighted the background of the long-term interest rate rebound, pointing to the burden of U.S. government debt, the expansion of corporate bond issuance for investments in AI data centers, and inflation concerns. With total U.S. debt exceeding $40 trillion (approximately 5,544 trillion won), it is interpreted that the Treasury's buyback alone cannot alleviate concerns about bond supply and prices.

This matter is more about the debate surrounding policy interpretation than the effects of the policy itself. The Treasury and its friendly interpretations emphasize strengthening market functions. In contrast, some market participants believe that the expansion of long-term bond purchases could be read as a signal to defend long-term interest rates.

Secretary Bessent's remarks also fueled this interpretation. Reuters-affiliated market reports included statements from Secretary Bessent suggesting that the buyback scale could be increased in the future. However, since this is not an official policy document but an interview statement, the actual expansion should be confirmed through subsequent Treasury schedules and announcements.

The reason the crypto market is interested in this matter is due to the ripple effects of long-term interest rates. Long-term interest rates are intertwined with the discount rates of risk assets like Bitcoin (BTC) and Ethereum (ETH), dollar preference, and liquidity expectations.

However, no official figures have been presented to definitively state the impact of this measure on virtual asset prices. What is confirmed is that the Treasury has increased the scale of long-term bond buybacks, President Trump has denied giving any instructions, and the decline in long-term interest rates was quickly reversed.

The trends in U.S. long-term interest rates and the dollar are also mentioned as variables that could increase the volatility of interest-sensitive assets for Korean investors. If U.S. long-term yields remain high, the valuation burden on global risk assets could increase, and dollar preference may strengthen. Conversely, if the upward pressure on long-term interest rates eases, the interpretation of interest-sensitive assets such as gold, Bitcoin, and growth stocks could change.

President Trump's denial has drawn a line regarding the controversy over the directive's origin. However, questions from participants in the bond market remain. The expanded long-term bond buyback is set to be implemented from September 9 to November 4, 2026.