BESSENT BLAMES OIL FOR HIGHER BOND YIELDS — SAYS HE “CAN’T SET THE EQUILIBRIUM PRICE” — RAISED THE BUYBACKS ANYWAY

Treasury Secretary Scott Bessent went on CNBC’s Squawk Box on Monday, September 21. Joe Kernen asked why long-term rates keep climbing. Bessent pointed at oil: “We have one of the highest correlations ever between 10 and 30 year bonds and crude oil price and crack spread.” The crack spread is the gap between crude and the diesel and gasoline made from it. He says the way down runs through the end of the Iran war: “Once we get on the other side of this conflict, which we will, I think the oil markets are going to be more supplied than they previously were and rates should come down.”

Asked about the Treasury buying back its own long-term bonds, he said, “I just raised the size because we are in a very illiquid period.” Then: “I can’t set the equilibrium price, but markets are never in equilibrium.” His old mentor Stanley Druckenmiller called the program “price management” in a Wall Street Journal op-ed in August.

Put the two answers side by side. If oil is pushing rates up, buying bonds does not pump one more barrel. It props up the price of the government’s own IOUs while everyone waits for a war to end, and the government is the biggest borrower in the room. The 10-year yield rose above 5% the week of September 14 for the first time since 2007, per CNBC. The Fed raised rates on September 16. A price you have to hold up is not a price. Nobody holds up bitcoin’s. At the time of this writing, bitcoin was $85,162