US Treasury alarm sounds as trillion-dollar debt pressures put market at odds with the Treasury Secretary; crisis may be only a matter of time

⑴ Recently, US long-term government bonds have faced intense sell-offs, with the 30-year bond yield reaching 5.24% at one point, approaching a 19-year high. The 10-year yield simultaneously rose to 4.71%, marking the highest level in about a year.⑵ In response to market turmoil, Treasury Secretary Besent acted urgently, planning to increase long-term government bond repurchases this autumn and pledging to use ample policy tools to support the market. New measures are also being considered to curb the continually expanding federal debt.⑶ However, the market remains unconvinced. Bond vigilantes continue to express their distrust through actions, and traders generally question whether current measures can truly resolve America's increasingly expanding debt problem, or whether the bond market will ultimately take the lead in shaping the outcome.⑷ Former Enron star trader and now philanthropist John Arnold bluntly stated that it is reasonable to expect that at some point a crisis will inevitably arrive. He worries that if the fiscal situation continues unchanged, once a critical threshold is breached, the consequences will be uncontrollable.⑸ This fiscal year's federal budget deficit has nearly reached $1.8 trillion, and net interest expenditure is projected to surpass $1 trillion in fiscal year 2026 and continue rising. If the repurchase plan is funded by issuing more short-term debt, it is merely a temporary relief and cannot resolve the core conflict.⑹ Meanwhile, the war in Iran is pushing up oil prices and increasing military spending. Adding to this is uncertainty about monetary policy prospects from new Federal Reserve Chair Walsh, further intensifying inflation concerns and pricing confusion in the long-term government bond market.⑺ The Treasury aims to lower yields, while the Fed Chair believes the market should guide policy; their conflicting signals create a subtle tug-of-war for this week's Jackson Hole Global Central Bank Annual Meeting. Any statement regarding inflation or balance sheet reduction may trigger a repricing of US Treasuries, the dollar, gold, and stocks.