Summary of Key Points
On the eve of the G20 Finance Ministers and Central Bank Governors Meeting, US Treasury Secretary Steven Mnuchin addressed various concerns regarding the instability in the US debt market, high levels of debt, and the bond repurchase program. He denied any turmoil in the US debt market and emphasized the resilience of the US economy. He attributed the rise in interest rates to rising energy prices and the Iran conflict, suggesting that these factors would subside, and argued that the increase in rates reflected market confidence in the US economy. Mnuchin defended the bond repurchase program, comparing it to the actions of European and Japanese central banks. At the same time, the US is facing diplomatic pressures, including skepticism from allies and dissatisfaction due to the Iran war.
Detailed Analysis
1. Mnuchin: No Turmoil in the US Debt Market; Economic Resilience as a Reassurance
Mnuchin directly refuted claims of market instability, stating that the US bond market has performed best among global counterparts this year. He argued that there is excessive concern about increasing debt and rising interest rates, ignoring the solid fundamentals of the US economy. Despite a large fiscal deficit, the US economy continues to grow, which is an advantage over many developed countries with weak growth. Data shows that the yield on 10-year US bonds has been relatively stable, with little movement during Asian trading sessions last week, indicating that the market is not as panicked as some believe.
2. Rising Interest Rates: Caused by Energy and Iran Conflict, but They Will Cool Down
Mnuchin attributed the rise in interest rates to two main factors: rising energy prices and inflationary expectations sparked by the Iran conflict. These factors have increased investors' fears of future inflation, leading them to demand higher returns. However, he emphasized that these are temporary and will gradually subside. Interestingly, he viewed the increase in rates as a sign of market confidence in the US economy, suggesting that investors are willing to demand higher returns because the economy is strong, not because it is weak.
3. The Bond Repurchase Program is Criticized? Using Europe and Japan as a Comparison
The US Treasury announced plans to double the scale of long-term bond repurchases (at least $4 billion per transaction), which some feared would distort market dynamics and undermine the predictability of government bond operations. Mnuchin countered this, pointing out that the European Central Bank (ECB) and the Bank of Japan have undertaken similar large-scale bond purchases without significant criticism. He explained that the purpose of the repurchase program is to stabilize the market, especially during periods of low activity, and that the larger-scale plans have not yet been implemented; the goal is to slow down market fluctuations, not to change market prices.
4. G20 Meeting Approaches: Allies Unwilling to Be Soothed; Iran War Adds to Pressure
The US is hosting the G20 meeting, but it is facing significant challenges. Former US Treasury officials have indicated that other G20 finance ministers are unlikely to be persuaded by Mnuchin's reassurances. The US debt market has surpassed $40 trillion, and Trump's Iran policy has affected many economies that are already opposed to the war. These factors make it difficult for the US to change the current situation through diplomacy. Senior US Treasury officials also acknowledge that long-term interest rates are already above what they consider "reasonable" levels and that efforts are needed to lower them, but allies may not agree with these measures.
5. Mnuchin's Interventions: Not Limited to the Bond Market
Mnuchin is not new to using interventionist measures to stabilize markets. For example, in August, he jointly intervened in the foreign exchange market with Japan to support the yen and prevent it from depreciating too rapidly. In October 2025, he purchased Argentine pesos to help stabilize the Argentine currency. This shows that he is willing to take proactive actions to manage market volatility, whether in the bond or foreign exchange markets.
Conclusion
Mnuchin's main goal is to maintain market stability and reassure investors that the US economy is strong and that the debt market is under control. However, the skepticism from G20 allies, the impact of the Iran war, and the reality of high US debt levels cast doubt on the effectiveness of his efforts. Investors should pay attention to two key factors: whether interest rates will indeed cool down as he predicts, and whether the attitudes of other G20 countries at the meeting will affect market sentiment.