Treasury Secretary Scott Bessent is set to appear before the House Financial Services Committee on Tuesday for his annual testimony, a session that comes at a delicate moment for U.S. financial markets. The 10-year Treasury yield briefly touched 5% on Monday, its highest level in three years, and the move has put Bessent's policy choices under the spotlight.
The hearing is formally focused on oversight of the International Monetary Fund, but lawmakers are expected to press Bessent on inflation, energy prices, interest rates, and the national debt. In prepared remarks, Bessent plans to highlight the effectiveness of sanctions on Iran, wage gains for lower-income workers, and the fact that more than 64 million tax returns have claimed the tax cut passed last year.
However, rising costs are likely to dominate the questioning. Oil prices have climbed above $100 a barrel as the Iran conflict intensifies, pushing U.S. gasoline prices to an average of $4.32 a gallon, up $1.14 from a year ago, according to AAA. Diesel costs $6.23 a gallon, a $2.54 increase over the same period. The consumer price index is up 3.4% year-over-year, leading investors to bet on the Federal Reserve raising rates, even as President Trump publicly calls for cuts.
Bessent, a longtime friend of Fed Chair Kevin Warsh, meets with him weekly. But the bond market has not cooperated with the administration's goals. Bessent entered office with a stated aim of pushing the 10-year yield below 4%. Instead, it has surged to near 5%, and his efforts to intervene have not worked as intended.
Last month, as yields climbed, Bessent tripled the size of the Treasury's bond buyback program in an attempt to bring them down. Yet yields are higher now than before the move. Economists argue the action backfired: rather than calming the bond market, it signaled to investors that the Treasury itself was worried about rising rates, which pushed yields even higher.
Critics point to a deeper problem. The buybacks Bessent promised total about $6 billion, a negligible amount compared to the $32 trillion Treasury bond market. Legendary investor Stanley Druckenmiller, Bessent's mentor, warned that artificially suppressing yields would backfire. Economists across the political spectrum argue the real issue is the federal deficit itself, not a market malfunction the Treasury can fix with buybacks.
Unlike the Federal Reserve, which can create money to calm markets during a crisis, the Treasury has no such power. That leaves Bessent trying to manage a problem with tools that critics say were never designed for the job. The national debt has surpassed $40 trillion, and budget deficits are running at roughly twice the 3% of GDP target that Bessent and Trump had promised.
Despite the criticism, the broader economy shows some strength. The S&P 500 is up about 27% since Trump took office, and unemployment stands at 4.1%. Bessent's prepared testimony notes that wages for the bottom 25% of earners have grown faster than for top earners. Still, mortgage rates, which move with the 10-year yield, have neared 7% for the first time since June 2025.
The bond market's recent moves have also weighed on other assets. stocks with high valuations face a squeeze as yields climb, and gold has slid amid the oil surge and rising Treasury yields. The FTSE 100 hit a two-month low as UK bond yields also spiked, and Asian markets face deepening selloffs with oil near $110 and yields near 5%.
As Bessent faces lawmakers, the central question is whether his approach can stabilize the bond market or whether the underlying fiscal trajectory will continue to drive yields higher. The hearing may offer few answers, but it will likely underscore the tension between the administration's promises and the realities of the market.
This article is for informational purposes only and does not constitute financial advice.
