Citi's Nathan Sheets Says Bessent's $4 Billion Bond Plan Won't Work
Updated
Updated · Benzinga · Aug 25
Citi's Nathan Sheets Says Bessent's $4 Billion Bond Plan Won't Work
3 articles · Updated · Benzinga · Aug 25
Summary
Nathan Sheets, Citigroup’s global chief economist and a former Treasury undersecretary, said Scott Bessent’s effort to cap long-term yields is unlikely to succeed and could eventually damage policy credibility.
Treasury on Aug. 19 said it would at least double long-end buybacks to $4 billion per operation after the 30-year yield hit a 19-year high, but the initial drop in yields reversed within a day.
Sheets argued the purchases are too small against a $1.2 trillion daily cash market and $739 billion in expected quarterly borrowing, while deficits of 6% of GDP imply $20 trillion to $25 trillion of issuance over the next decade.
Stanley Druckenmiller, Bessent’s former mentor, attacked the plan a day earlier, saying a 5.5% 30-year yield would be an "invoice" for fiscal excess rather than a market malfunction.
Markets still reflect that pressure: Kalshi traders put 2026 year-end odds at 56% for the 10-year yield to finish at 4.75% or higher, while TLT traded near $83 after touching its lowest close since 2004.
Will the Treasury's multi-billion dollar bond buybacks prevent a liquidity crisis, or merely delay an inevitable reckoning with massive federal deficits?
How might corporate borrowing for AI infrastructure and massive hedge fund repo demand neutralize government attempts to lower long-term interest rates?