SINGAPORE, Aug 25 (Reuters) – Billionaire investor Stanley Druckenmiller said the U.S. is eroding the Treasury market’s credibility and missing a debt reform window with buybacks that have caught bonds by surprise.
The former Soros Fund Management colleague of Treasury Secretary Scott Bessent said markets were “correct” to view last week’s announcement of a doubling in long-end buyback lots to $4 billion as “price management” and “a mistake”, in an opinion piece published by the Wall Street Journal on Monday.
The Treasury announced the move on Wednesday after the U.S. 30-year yield hit a nearly 20-year high, and it triggered a short-lived rally that soon reversed.
Druckenmiller said the long bond yield was the most important price in the world and intervening risked being sucked into even larger buybacks to defend it, as well as damaging credibility by departing from a reputation for reliability.
“These enlarged operations happen to run through the final stretch of a midterm campaign,” he said.
“Debt management that even appears to follow the political calendar spends the one asset that took two centuries to accumulate: the credibility of the Treasury market. That asset doesn’t regain its value so easily.”
The Treasury did not immediately respond to a request for comment sent outside usual business hours by email.
Druckenmiller, best known as a key architect of George Soros’ famous bet against the British pound, has worked alongside both Bessent and Fed Chair Kevin Warsh in investing and said fiscal reform was needed to lower yields.
“You can’t buy your way out of a solvency conversation with liquidity tools,” he said.
“What should happen instead is straightforward. Return buybacks to their stated purpose: small, scheduled…If the 30-year must trade at 5.5% to clear, that isn’t a crisis. It is an invoice. Then do the only thing that durably lowers long-term yields: address the primary deficit.”
(Reporting by Tom Westbrook; Editing by Muralikumar Anantharaman)
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