Bessent names the deficit as a factor behind 10-year Treasury yields

Treasury Secretary Scott Bessent says the need to address the federal deficit is one factor affecting yields on the 10-year Treasury bond. The remark marks a shift from his earlier position, when he attributed elevated rates mainly to global issues.

At the time Bessent pointed to global factors, the 10-year yield was trading near 5%, a level it had not touched since 2023. That move came with the yield already under upward pressure from geopolitical tensions, Norway's plans to diversify its sovereign holdings away from Treasuries, and disappointment that the Treasury's bond buyback program was smaller than markets had expected.

The buybacks were meant to help contain borrowing costs at the long end of the curve. Yields kept climbing anyway, reaching their highest levels since 2023 even as Bessent pointed to an industrial super-cycle and gains in real wages as signs of a strong economy. Separately, the gap between 2-year and 10-year yields has widened to its highest since September 11, with the 2-year near 4.42% and the 10-year near 4.98%.

By naming the deficit directly, Bessent is acknowledging a domestic source of pressure on yields that he had previously played down. Markets had already priced in much of that pressure, given the yield's climb to 5% and the limited effect the buyback program has had on long-end rates. For anyone holding or pricing long-dated Treasuries, the shift signals that fiscal policy, not just global conditions, is now part of the official explanation for why borrowing costs remain high.