Chart of the Day: Will the "Bessent Bazooka" Work?

Treasury Secretary Scott Bessent just tried to fire a “bazooka” at the bond market. But so far, the move is falling flat. A quick history lesson might help you understand what’ll come next – and how to trade it.

Take a look at the MoneyShow Chart of the Day. This shows the trading action in Long Bond Futures (ZBU26) this month. They track bond prices, not bond yields, which move in the opposite direction. When Bessent said Wednesday that the US would buy back “at least double” the amount of longer-term bonds previously planned, prices spiked – as you can see in the area I marked red.

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Long Bond Futures

Source: TradingView

But just one trading day later, the pop...flopped. Bond traders went back to selling, and bond prices went back to falling.

Bessent showed up on CNBC to say the newly raised $4 billion buyback could be even bigger – and that the feds have “a big toolkit” to bring yields down. But the market's reaction to that was decidedly “meh.”

So, what’s this history lesson I’m talking about? Well, former Treasury Secretary Hank Paulson did this SAME thing during the housing and mortgage meltdown.

Throughout the meltdown process, he and other government and Fed officials would announce various rescue measures for banks and lenders. They’d prop up the markets temporarily. But the gains wouldn’t stick because the interventions weren’t big enough.

Then in July 2008, Paulson told Congress that he wanted a “bazooka” in the form of power to save firms like Fannie Mae and Freddie Mac from collapsing. He said if markets “know you’ve got it, you may not have to take it out.” But that didn’t work, either. Fannie and Freddie had to be taken over by the government not long after.

The stock market FINALLY stopped falling for good in March 2009. Then a multiyear bull market began. But if you stuck around too long after trading each bazooka bounce, you got your head handed to you.

Bottom line? The latest move by Bessent looks like an incremental step, NOT what you see at a final low for bond prices. Or high for bond yields, if you prefer to think about it that way.

A LASTING low would require stricter fiscal discipline in Washington, a marked downturn in inflation, an economic recession, or something truly powerful. Bessent is a smart guy. But with $40 trillion and counting worth of US federal debt, it’s going to take a lot more than $4 billion to stem the tide of selling!