Oil price falls below $100 + Bessent speaks out, US Treasury yields retreat from 2002 highs.

US Treasury yields retreated from their highest levels since 2002 as oil prices fell back below $100 a barrel and Treasury Secretary Scott Bessent insisted the government's debt burden was manageable. The 10-year and 30-year Treasury yields fell 3 basis points and 4 basis points to 5.27 per cent and 5.63 per cent respectively, while the 2-year yield was broadly flat. Crude prices fell back on Tuesday amid signs that more crude supply was making its way through the Strait of Hormuz. It marked a pause in a global bond sell-off that has been driven by inflation fears stemming from the US-Iran war and rising expectations of further monetary tightening by the Federal Reserve. Bessent sought to reassure investors that a combination of economic growth and spending restraint would "soon" begin to change the US government's borrowing path. In a fireside chat in Pennsylvania on Monday evening, he said the government would start to "bend this curve". Doubts arise: deficits have no solution, reassurance hard to work Still, the market remained sceptical of Bessent's remarks and was not willing to say the bond sell-off was over. Gareth Berry, strategist at Macquarie, said: "Given a 6 per cent deficit and no plan to reduce it, the market is likely to be very sceptical. Talking about targets is not the same as a plan." James Ringer, global fund manager at Schroders, said he was looking beyond just crude prices. "The first condition for a meaningful rally across the curve is that energy prices start to fall," he said. "That's not just crude prices, but also refined product prices." Separately, Ray Dalio, founder of Bridgewater, warned that the US was approaching the limits of its debt cycle and could face a crisis within three years if spending continued to outstrip revenue. He said US Treasuries were vulnerable to declining demand from China and Japan, the two largest foreign creditors of the US. Nevertheless, HSBC strategists argued that the market's bet on roughly 80 basis points of Fed rate hikes in 2027 was "excessive", though they stuck with a bet on a widening yield spread between 5-year and 30-year Treasuries. "We think the surge in volatility, combined with historical data showing a lack of clear technical resistance at these levels, has left many investors on the sidelines, even as the attraction of elevated long-end rates becomes increasingly obvious," Dhiraj Narula, US rates strategist at HSBC, wrote in a report.