Can Bessent’s ‘Big Tool Kit’ Calm Bond Investors?

Andrew here. We’re still focused on the Treasury Department’s decision to buy back long-dated bonds in a bid to restore market calm — and why that strategy hasn’t so far yielded the results the Trump administration hoped.

It will be interesting to hear what Kevin Warsh, the Fed chairman, thinks of all of this when he speaks at the central bank’s confab in Jackson Hole, Wyo., next week. Meanwhile, Bitcoin has surged nearly 20 percent over the last two days, potentially signaling how traders are responding to these bond policy shifts. More below.

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‘Competition for capital’

Bond traders are getting restive again.

That’s despite Treasury Secretary Scott Bessent’s latest whatever-it-takes pledge to lower borrowing costs.

But he also acknowledged complications, including economic fallout from the war in Iran and a wave of debt issued by hyperscalers. It’s raising questions from investors about whether the Trump administration can prevail against so-called bond vigilantes.

The latest:

• The yield on the 10-year Treasury traded around 4.7 percent on Friday, with Thursday’s sell-off essentially erasing gains from a fleeting bond rally.

• S&P 500 futures are rebounding slightly. But the benchmark index looks set to end the week in the red as the bond market turmoil rattles the bull market’s narrative.

• Bitcoin (more on that below) and gold are rising as the U.S. dollar declines.

“We have a big tool kit,” Bessent told CNBC, blockerting that the Treasury Department was prepared to go beyond its plan to at least double repurchases of longer-dated Treasury bonds between September and November.

That said, he didn’t elaborate on what that might look like.

Doubts are creeping into investors’ minds. “It’s a little bit like paying your mortgage with your credit card,” James Sullivan, the co-head of global fundamental research at JPMorgan Chase, told CNBC. “It can work for a while, but eventually the mismatch starts to become more obvious.”

Is the artificial intelligence boom a problem? Big Tech is expected to flood the market with hundreds of billions in debt issuances to fund its A.I. investments.

The latest example: Broadcom, whose chips are in high demand from A.I. hyperscalers, is in talks to raise at least $60 billion in debt, Bloomberg reports, citing unnamed sources.

Bessent has said he’s watching the A.I. angle. In his CNBC interview on Thursday, he questioned why tech giants were issuing so much long-dated debt rather than, say, five-year bonds.

In the long run, he said, the data centers they’re building are “going to cause disinflation” in a few years by boosting business productivity.

That should ease jitters in the bond market. But, he added, “it is causing a short-term competition for capital.”

HERE’S WHAT’S HAPPENING

Oil prices look set for another weekly gain. Brent crude, the international benchmark for oil, traded around $94 on Friday. It’s up more than 18 percent over the past two weeks amid the collapse of U.S.-Iran peace talks and President Trump’s threat of “tremendous economic consequences” for any country that does business with Iran.

Walmart’s shares tumble sharply. Shares in the retail giant fell 9 percent on Thursday after it reported its worst quarterly sales growth in more than six years. The company cited rising gas prices as a factor in consumers’ tightening their wallets. U.S. retailers more broadly have said that people are becoming warier of spending, even as household finances remain relatively health.

Is another exodus in Big Law coming? Star partners at Weil, Gotshal & Manges are reportedly considering leaving for two rival firms, Paul Weiss and Simpson Thacher & Bartlett, according to The Wall Street Journal, citing unnamed sources. The industry is still buzzing about the departure of Bill Savitt and other lawyers from Wachtell, Lipton, Rosen & Katz to Gibson Dunn. Separately, the Trump administration plans to challenge the American Bar Association’s power to accredit law schools.

A founder of a failed fashion-tech start-up is sentenced for fraud. A federal judge sentenced Christine Hunsicker, who was convicted of running a nearly $300 million scheme at the company, CaaStle, to five years in prison. Hunsicker, who DealBook reported had clashed with one of her backers, Henry Kravis, argued that she had engaged in the fraud partly because a 30-pound mirror had fallen on her head.

The A.I. flyaround

• Anthropic expects its I.P.O. to meet or exceed the amount of money that SpaceX raised in its record-breaking public market debut, according to Bloomberg, citing unnamed sources. (It could also publicly file its offering prospectus as soon as this month.) A major unknown is the valuation that Anthropic will pursue in the I.P.O. (Bloomberg)

• Republican politicians who once championed data centers as sources of economic growth are reading the room and moving to halt their development. “If you’re a Democrat, we haven’t had a wedge issue like this in decades,” said a former Democratic lawmaker from Oklahoma who now calls for tougher A.I. regulation. (WSJ)

• Poolside.ai, a start-up that helps developers build A.I. models, has reportedly agreed to license its software to Nvidia for $6 billion. Nvidia will also invest $1 billion in the company at a $12 billion valuation. (Newcomer)

• Here’s how the explosive rise of Micron’s stock price, and the A.I. boom more broadly, have transformed the chipmaker’s hometown, Boise, Idaho. “Five years ago, nobody had a designer purse here, nobody cared, nobody even knew what Louis Vuitton was,” the owner of a jewelry boutique in the city said. “Now everybody’s carrying them.” (CNBC)

A Trump push boosts crypto

Bitcoin has been on its best run in more than two years, trading above $77,000 on Friday.

The rally is getting help from the Trump administration’s bond buyback plan — and from President Trump himself, Niko Gallogly writes.

A recap: Trump called on Congress on Wednesday to swiftly pblock the Clarity Act, a long-awaited piece of market structure legislation.

The administration appears eager to keep the cryptocurrency industry, a major source of Republican fund-raising, in its good graces, as this week’s White House gathering with several crypto leaders, including Brian Armstrong of Coinbase, showed.

Where do things stand with the bill? The Senate doesn’t yet have the votes, industry and legislative officials told DealBook.

With only a few weeks left in the legislative calendar, its path to pblock before the midterms is fading.

The banking lobby is trying to keep it that way. Mainstream lenders argue that the bill does not ***ly outlaw so-called crypto rewards earned on stablecoins, which they say are a form of unregulated interest payments.

Their opposition could make it harder for Republican senators to vote yes.

Democrats are unlikely to sign on without tougher ethics provisions, which would limit elected officials’ ability to enrich themselves from crypto. (Trump reported $1.4 billion in crypto-related earnings last year, raising concerns among Democrats and ethics watchdogs.)

What to watch: The bill could move to a cloture vote as early as Sept. 15, with 60 votes needed to advance. If it pblockes that hurdle, senators would be able to add amendments and debate the bill on the Senate floor before a final vote.

Keeping the Clarity Act in the spotlight could help the White House motivate the crypto industry to donate more to Republican candidates who support crypto in the midterm elections.

Fairshake, a crypto-allied super PAC that backed Trump, spent nearly $200 million during the 2024 election cycle. It started the year with $193 million in its war chest but has spent only about $60 million of it.

Quote of the day

“You could imagine some gameplay … a bit of skulduggery.”

A cabdriver in London to The Financial Times about how the industry might respond to the arrival of autonomous taxis.

While the British government has welcomed companies like Waymo and Wayve, drivers argue that the technology could further undercut their industry and their livelihoods.

Talking A.I. with the C.E.O. of Link Logistics

Every week, we’re asking a leader how he or she uses artificial intelligence. This week, Luke Petherbridge, who leads Blackstone’s industrial real estate company, Link Logistics, told Sarah Kessler that A.I. helps pinpoint markets with growth potential. The interview has been lightly edited and condensed.

How do you personally use A.I.?

Our organization is enormous, and it allows me to connect dots across our vast data sets.

What is an example of that?

We invest in 50 markets, and 300 to 400 submarkets. Real estate is a local business, and we’re looking at it from a very macro level. Being able to say that the signal in Northeast Dallas is highlighted green — you would eventually work that kind of thing out, but it’d take longer.

What do you anticipate changing going forward because of A.I.?

Supply chain networks are like a path of travel. We should be able to understand where networks are growing with all our customers, and then ultimately own the right building and the right path of travel to capture that growth.

We were doing all of this work. But now we can be more precise.

THE SPEED READ

Deals

• A loan to Guggenheim Partners’ blocket management division has dropped to distressed pricing levels amid questions about the health of businesses tied to the firm’s C.E.O., Mark Walter. (FT)

• A big Italian lender, Banca Monte dei Paschi di Siena, announced two bids to buy two rivals for a combined 34 billion euros (about $40 billion) in an effort to fend off a hostile takeover effort by Banca Intesa Sanpaolo. (Bloomberg)

Politics, policy and regulation

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