Episode 005. Is Bessent Helping?

Rising Treasury yields reflect a fundamental disconnect between government policy and persistent inflation. While the Treasury’s recent decision to double long-dated bond buybacks aims to stabilize markets, these efforts are largely ineffective because they ignore the reality of 65 consecutive months of core PCE inflation above 2%. Traditional monetary tools designed for a low-inflation environment fail when inflation is structural. The federal government’s 6% deficit, currently consuming nearly a quarter of GDP, remains the primary driver of this inflationary pressure. Bond investors, wary of currency debasement, are demanding higher term premiums and real yields as compensation for risk. Until fiscal authorities address the deficit through meaningful spending cuts or tax increases, market volatility will likely persist, as the bond market remains the only force capable of compelling structural change.