Bessent's Credibility Problem Deepens Amid Deficit Woes

The recent actions of US Treasury Secretary Scott Bessent have raised concerns about his credibility. The veteran bond and currency trader was expected to be Wall Street's voice in Washington, but nearly two years into President Donald Trump's second term, reality has proved different.

Bessent's surprise currency and bond market interventions have been seen as hasty attempts at quick fixes rather than a coherent long-term strategy. Investors are questioning his commitment to the Fed's 2% price stability goal and his willingness to raise interest rates to control inflation.

The Treasury's announcement last week that it would double the size of long-dated bond buybacks was met with an increase in inflation expectations, higher gold prices, and a weaker dollar. The 10-year yield, Bessent's north star, has risen to uncomfortably close to 5.00%. His goal when nominated was to keep a lid on the 10-year yield.

Bessent's hands are tied due to Trump's lack of inclination to cut the deficit, which is projected to be one of the widest on record at 6.6% of GDP in fiscal year 2026. Bessent claims there's a 'very good chance' the deficit has peaked and that savings can be achieved by cutting waste, fraud, and abuse from government spending.