Treasury Secretary Bessent Loses 'Market Calmer' Status as US Yields Surge Amid Iran Conflict

U.S. Treasury Secretary Scott Bessent faces a credibility crisis as surging Treasury yields defy his reputation for stabilizing markets, with limited policy tools available to reverse the trend. Since the Trump administration initiated military action against Iran 12 weeks ago, the 10-year Treasury yield has spiked by more than 0.5 percentage points, while the 30-year yield briefly hit its highest level since 2007. Bessent, previously lauded by President Trump for his ability to calm markets, is contending with a bond sell-off driven by soaring oil prices and resurgent inflation fears. Analysts argue that theoretical tools at his disposal, such as expanding bond buybacks or shifting issuance toward shorter-dated debt, risk backfiring. Deutsche Bank strategist Steven Zeng warned that any unscheduled adjustment to the Treasury's quarterly financing strategy could "scare the market," while JPMorgan Asset Management's Priya Misra noted that executing a shift in debt supply is exceptionally difficult given the widening fiscal deficit and the Federal Reserve’s hawkish stance. Market participants see only two viable paths to lower long-end yields: a de-escalation of Middle East tensions restoring energy supply stability, or a sharp economic downturn forcing the Fed to resume rate cuts. With the May inflation print recording its largest increase since 2023, a near-term cooling in yields appears unlikely.