Bond Yields Cross 5%: Bessent’s Campaign Is Failing and Analysts Ask Whether the Fed Will Intervene

Yields on 10-year U.S. bonds crossed the 5% threshold for the first time since 2007, putting Treasury Secretary Scott Bessent’s campaign to lower them to the test — and raising the question of whether the Federal Reserve could be forced to intervene by buying government debt, even as it is expected to raise interest rates today.

Rising yields are driving up borrowing costs across the U.S. economy and could enter the Fed’s monetary policy calculations. But analysts believe the central bank will resist any clear call from the Trump administration to “rescue” the market. The focus on possible Fed involvement comes as Bessent has taken an unusually active role in trying to tame the rise in yields, which he considers out of line with the economic outlook — last week he expanded a key debt buyback operation, but the campaign is failing.

On Tuesday, ahead of a congressional hearing, Bessent dismissed the rise as the result of “global issues.” Analysts link the increase to higher oil prices, expectations that the Fed will raise rates this week, competition for capital from artificial intelligence spending and concerns about the U.S. fiscal trajectory.

The turmoil is raising the question of whether the Fed might be asked to buy government debt to reduce supply, which could cap or lower yields. But Fed watchers see little chance of that, except in the case of serious market turmoil. The question persists nonetheless, since Fed Chair Kevin Warsh has signaled greater willingness to coordinate with the Treasury on some issues. “One of the Fed’s unwritten mandates is financial conditions,” said Rick Rieder of BlackRock.

Most analysts agree: a stronger push by the Treasury for the Fed to intervene and buy bonds in large quantities to cap yields is “unacceptable” to central bankers. “Warsh cares a lot about the Fed’s credibility — and his own,” said Lou Crandall of Wrightson ICAP, adding that “the Treasury has damaged its credibility with market interventions and the Fed leader will not want the Fed to be sucked into this.”

Mark Sobel, a former Treasury official now at the OMFIF think tank, said the “administration could push the Fed to engage in some form of quantitative easing or yield curve control, essentially seeking cheap financing of the budget” — but like Crandall, Sobel believes Warsh will resist involvement.

Today, the Fed is expected to raise the rate by a quarter point, to the 3.75%-4.00% range. Market participants believe this could help the Treasury’s cause, because it would strengthen the Fed’s credibility against inflation — which should help long-term yields fall over time. A Deutsche Bank survey published on Monday found that investors see a hike now as something that would raise short-term yields slightly, but that long-term yields would go even higher if the Fed leaves rates unchanged.