Bessent says the US Treasury market is “in very good shape”; lower-than-expected repo scale does not change her optimistic outlook

1. On Thursday, U.S. Treasury Secretary Bessent attempted to downplay market concerns about the smaller-than-expected scale of Treasury bond repo operations, while also lessening worries about a significant surge in U.S. Treasury yields. He stated that the current Treasury market is "in very good condition." 2. Bessent specifically mentioned the strong performance of two Treasury auctions in the past few days, and reiterated that the recent correlation between bonds and energy prices has been unusually high. Previously, the two-year Treasury yield had reached its highest level since 2024, and the 10-year yield also rose to its highest since 2023.3. Factors behind this round of sell-off include a spike in crude oil prices, as well as the Treasury’s actual bond repurchase volume falling short of expectations. On Wednesday, the Treasury announced plans to repurchase up to $600 million in bonds, but on Thursday, the actual total repurchased was only $519 million.4. Bessent explained: "We only repurchase bonds when prices are low," but in this operation, bondholders seemed more inclined to retain their long-term securities. He noted that normally the Treasury would receive about $2 billion in sell offers, but this time only received around $1 billion.