Woofun AI reports that the US Treasury has signaled a willingness to sacrifice the strength of the US dollar to Wall Street in an effort to curb rising yields, a strategic pivot orchestrated by Treasury Secretary Bessent. This unprecedented intervention marks a decisive break from traditional debt management principles, prioritizing yield control over currency valuation in a high-stakes macroeconomic maneuver.

Market conditions deteriorated rapidly as U.S. long-term Treasury bond yields soared this week, driven by mounting debt burdens and persistent inflation concerns. The 30-year Treasury yields reached their highest levels since 2007, reflecting intense competition from corporate financing activities. This surge in borrowing costs created an urgent need for policy intervention to stabilize the bond market and prevent further financial instability.

Woofun AI data shows that on Wednesday, the Treasury announced an aggressive plan to buy existing 10- to 30-year Treasury bonds, stating it would "at least double" its previous purchase volume. This action represents a complete departure from the department's long-held principle of "regular and predictable" debt management. Ironically, Bessent had previously endorsed this traditional approach in a speech last November, making the current shift a stark reversal of prior policy commitments.

Andrew Canobi, head of fixed income at Franklin Templeton in Melbourne, argues that solving America's structural debt problems is too difficult for policymakers to address directly. He believes the administration faces a binary choice between controlling yields or accepting a weaker dollar. Canobi noted that Bessent is essentially saying that the government is prepared to sacrifice some of the dollar's strength to keep longer-term yields under control, using the currency as a safety valve.

Gerald Gan, chief investment officer at Reed Capital in Singapore, views the dollar as the "biggest victim" of this policy shift. He believes Bessent is deliberately pushing down long-term real interest rates and implies tolerance for a weaker dollar to keep the economy running. In response to these developments, Gan stated, "I will diversify my investments further away from the dollar," signaling a broader trend among institutional investors to reduce USD exposure.

Political motives became apparent even before this major buyback, as Washington showed signs of anxiety over market volatility. At the end of last month, the U.S. joined forces with Japan to intervene in the forex market to support the yen. Bessent suggested that the Federal Reserve's tools could be used to fund further interventions if necessary, aiming to prevent Japan from being forced to sell U.S. Treasuries and destabilize the bond market.

Amir Anvarzadeh, a strategist at Asymmetric Advisors in Singapore, said that introducing Treasury buybacks at such a sensitive time has fueled speculation that policymakers are panicking. He noted that while they may not aim to significantly weaken the dollar, they are trying to stabilize yields, with the dollar as the casualty. Given President Trump's occasional preference for a weaker dollar, Marco Casiraghi's team at Evercore ISI believes Washington's actions reflect political intentions to manipulate the market for competitiveness.

Audrey Childe-Freeman, chief foreign exchange strategist at Bloomberg Industry Research, sees this move as potentially negative for the dollar. She wrote that traders may view this as an attempt to suppress market pricing related to U.S. fiscal sustainability and the Federal Reserve's credibility in fighting inflation. Shoki Omori, chief fixed income strategist at Deutsche Bank AG in Japan, pointed out that recent price movements are highly revealing, indicating that investors are questioning broader aspects of U.S. policy beyond mere interest rate differentials.

De-dollarization is gaining momentum, with non-U.S. currencies and safe havens facing reevaluation. Masahiko Loo, senior fixed income strategist at State Street Investment Management, noted that AI-driven inflows into the stock market still provide short-term fundamental support for the dollar.

However, he warned that the latest interventions reinforce long-term trends of de-dollarization. Mark Cranfield, a strategist at Markets Live, said selling pressure is creating room for Asian currencies to rise, while Omori favors gold, the Swiss franc, and the Euro as alternatives.

Omori pointed out bluntly, "The Treasury can buy back its own bonds; but it cannot buy back the dollar." Under a clear strategy of artificially lowering borrowing costs, any attempt to drive down U.S. yields is effectively reducing the appeal of dollar-denominated debt compared to other assets. Although the dollar has previously withstood shocks, this round of aggressive intervention targeting long-term bonds is undoubtedly posing a new challenge to its global dominance.