Bessent Says Post-Conflict Oil Supply Glut Will Bring Rates Down as Treasury Boosts Long-End Buybacks

Treasury Secretary Scott Bessent said that once the U.S.-Iran conflict ends, oil markets will flip to oversupply and inflation pressures will ease, allowing interest rates to fall. Bessent has predicted oil prices could drop to as low as $40 to $50 a barrel in that scenario, a sharp contrast to the current elevated price environment that has kept bond yields elevated.

To manage the pressure on long-term yields, Bessent raised the size of long-end Treasury buyback operations during illiquid periods, at least doubling the maximum per-operation size from $2 billion to $4 billion effective September 9, according to Treasury guidance. The 10-year yield has climbed back above 5%, a level not sustained since 2007, after the Federal Reserve under Chairman Kevin Warsh hiked rates on September 16 and signaled persistent inflation risks. The 30-year yield has risen above 5.3%.

Against that backdrop, the fixed-income market is seeing notable signals from both policymakers and investors. The Barron's headline "Rate Hikes Have Begun. Why Investors Shouldn't Panic" reflects the broader effort to contextualize the Fed's move for retail investors. With the 10-year above 5%, Comcast is now the only Nasdaq-100 component yielding more than Treasuries, at just over 5%, after Kraft Heinz's transfer to the New York Stock Exchange last week removed it from the index.