Exclusive | How Scott Bessent is getting ready to slam Wall Streets bond vigilantes: Fear of God

Treasury Secretary Scott Bessent is determined to put the “fear of God” into the so-called “bond vigilantes” who have been dumping US Treasurys and sending interest rates soaring, according to a private sector economist with knowledge of his thinking.Bessent is particularly worried that institutional investors will continue to sell long-dated Treasury bonds in a trade that will send prices lower – and yields on the all-important 10-year bond surging to 5%, according to Wall Street executives who deal with him regularly.That, in turn, could snuff out economic growth as the midterm elections approach since it’s the 10-year Treasury bond on which many consumer rates are pegged – including 30-year, fixed-rate home mortgages.In response, insiders say Bessent has formulated a plan that could escalate if the vigilantes continue to push up interest rates.It goes beyond the $4 trillion in longer-dated bonds the Treasury purchased last week – and could include temporarily halting the issuance of certain long-dated debt like the 20-year Treasury bond, these people say.“Bessent knows what he’s up against – it’s how he made his living,” one economist with ties to the White House said, noting that the Treasury secretary was a hedge fund manager before joining the administration. “He also knows this is a band-aid solution to our debt problems that he needs to take as the midterms approach,” the economist added.A Treasury Department rep had no immediate comment.Market vigilantes – whether they’re in bonds or currencies – are the ultimate mercenaries since they seek to capitalize on what they see as bad government policy.

In the case of bonds, they are selling US debt while also placing negative “short” bets on US Treasurys looking to make money on price declines as some market participants believe US debt levels are growing to near unsustainable levels.Last week, the Treasury announced that total debt held by the public and the government h...