US Treasury Secretary Scott Bessent defended the lower-than-expected Treasury buyback operation on Thursday and downplayed concerns sparked by the recent sharp rise in yields, stating that the US Treasury market's "situation is fine."

On September 10, the US Treasury's final settlement for the bond buyback was only $5.19 billion, despite the department having previously announced a $6 billion cap for this operation.

In an interview with the media, Bessent explained that the smaller scale of the buyback was not due to insufficient market demand, but rather because market offers were not cheap enough, leading the Treasury to proactively control the pace of purchases.

He further revealed that the Treasury typically receives around $20 billion in offers, but this time it only received approximately $10 billion. This indicates that investors holding long-dated Treasuries chose to hold their positions rather than sell the bonds back to the Treasury, which Bessent interpreted as a signal of continued market confidence in long-term US debt.

He also cited the strong performance of two recent Treasury auctions as evidence of a healthy market, adding that investors are currently not demanding additional risk premiums on long-end Treasuries.

As previously reported, the US Treasury announced it would repurchase up to $6 billion in 10- to 20-year Treasury bonds on Thursday. This scale is three times larger than the previous maximum of $2 billion for a single long-duration debt buyback and exceeds the "at least $4 billion" guidance announced on August 19.

However, the market's initial reaction saw Treasuries continue to decline. Bloomberg Market Commentary stated bluntly that this was "hardly a jaw-dropping move," noting that $6 billion was at the low end of market expectations and insufficient to even achieve the effect of "stabilizing rather than reversing" the trend in long-end yields.

Peter Boockvar, Chief Investment Officer at OnePoint BFG Wealth Partners, said some investors had expected the buyback to reach between $7 billion and $8 billion, and the rise in yields was a direct reaction to those expectations being unmet.

On Thursday, against the backdrop of hotter-than-expected PPI inflation data, the two-year Treasury yield rose another 13 basis points to its highest level since 2024, while the ten-year yield touched its highest point since 2023.

The current Treasury selloff has coincided with a sharp surge in oil prices. Bessent once again emphasized that the recent correlation between the bond market and energy prices is unusually tight, suggesting that the latest rise in yields is only minimally related to concerns over fiscal conditions, and instead largely reflects shifting inflation expectations driven by energy price volatility.