Investor Stanley Druckenmiller criticized the US Treasury's strategy of bond buybacks, labeling it fiscal denial. He argues that the government should address its spending rather than artificially suppressing long-term yields through market intervention.
On August 19, the Treasury doubled its long-dated bond buybacks from $2 billion to at least $4 billion per operation. Druckenmiller predicts the 10-year Treasury yield, currently at 4.7%, will rise to 5.50%.
Federal debt has surpassed $40 trillion, with the deficit near 6% of GDP despite a 4.1% unemployment rate. Net interest payments on federal debt are projected to exceed $1.1 trillion in fiscal 2026, surpassing the defense budget.
The 10-year yield has risen by 50 basis points this year, while the 30-year yield reached 5.22%, with an August peak of 5.335%. Druckenmiller warns that higher yields will increase capital costs for businesses and mortgage rates.
