Bessent can ease 10-year yield via tactic he assailed, DB says

The Trump administration’s best hope for bringing about the lower 10-year Treasury yields they want may be to sell less of them — a tactic administration officials before taking office characterized as market manipulation, strategists at Deutsche Bank Securities said.

Treasury Secretary Scott Bessent last week said he and President Donald Trump “are focused on the 10-year Treasury” when it comes to lower borrowing costs, not the overnight interest rate set by the Federal Reserve. The US 10-year yield is, of course, below its late 2023 peak of about 5 percent reached after the Fed raised rates 11 times to beat back inflation. But now at about 4.5 percent, the rate remains higher than at any previous point since 2007.

Because Treasury yields are determined by supply and demand in the bond market, the administration’s power over them is limited to measures that affect one or the other, Deutsche Bank’s Matthew Raskin, Matthew Luzzetti and Steven Zeng said in a Feb. 12 report.

Among the most realistic of these, the strategists said, is curtailing the supply of long-maturity Treasury fixed-rate securities relative to short-term bills. This “can dampen net public-sector supply of duration and put downward pressure on term premia.” They consider it among the highest-likelihood measures the government might take to try to bring about lower yields.