Trump: Did not instruct Bassett to intervene in the U.S. debt market, economic growth will resolve the debt issue on its own.

On Friday, local time on the 21st, U.S. President Donald Trump delivered remarks on several topics including the U.S. debt market, the situation in Iran, and North American trade negotiations. Regarding the recent expansion of long-term U.S. Treasury bond repurchase operations by the Treasury Department, Trump stated that he did not instruct Treasury Secretary Steven Mnuchin to intervene in the U.S. bond market; it was Mnuchins decision to take action on his own, asserting that U.S. economic growth would independently resolve the national debt issue. On the Iran issue, Trump claimed that the U.S. has thoroughly controlled the entire region, and that Iran might reach an agreement with the U.S., but is currently not ready to do so. When discussing the USMCA trade agreement, Trump stated that the U.S. should be able to reach an agreement with Canada, indicating that current negotiations are progressing smoothly, while the U.S. has also initiated a new agreement with Mexico. From Trump's overall statements on Friday, the message he attempted to convey to the markets is quite clear: the debt issue relies more on economic growth and fiscal restructuring, while the Iran situation maintains negotiating space amidst ongoing economic pressure, and the North American trade negotiations are still moving forward. For the financial markets, two upcoming time points are particularly noteworthy: one is the Treasury Department's planned fiscal restructuring announcement this weekend or early next week, and the other is the announcement of Iran's economic action press conference on August 24, which Mnuchin had previously hinted at. The former will test Trumps claimed policy path of resolving debt through economic growth, while the latter could further influence U.S. inflation and the Treasury bond market through sanctions and oil price channels. Trump praised Mnuchin as very capable, saying he has a natural intuition for bonds. When asked on Friday whether he had urged Mnuchin to take action, Trump responded, No, not at all. He (Mnuchin) is a very capable person. He wanted to do it on his own. He is very good at this. Trump also commended Mnuchin, stating, He has a good intuition; he has a natural competence with bonds and interest rates, and he has done it. This comes as the U.S. bond market had just undergone a noticeable fluctuation. On Wednesday, the Treasury Department announced it would at least double the scale of its liquidity support repurchase operations for 10-to-30-year U.S. Treasuries, raising the size of each operation to at least $4 billion. After the announcement, long-term Treasury yields initially fell but quickly rebounded, with the 30-year Treasury yield rising back to around 5.26%, indicating market skepticism regarding whether the repurchase measures could sustain lower long-end yields. On Thursday, Mnuchin further signaled that the Treasury might continue taking action. He stated that the size of each long-term Treasury repurchase operation could exceed $4 billion and emphasized, We have a large toolbox, so stay tuned. Mnuchin also mentioned that the current Treasury market is relatively thinly traded, especially with inadequate liquidity in the 30-year Treasuries; in his view, long-term Treasury yields do not fully reflect the fundamentals of the U.S. economy. As for how large the repurchase scale could ultimately reach, Mnuchin stated it would depend on market conditions. Trump made it clear on Friday that he did not instruct Mnuchin to intervene in the bond market. This statement suggests that the White House hopes to attribute the core logic of resolving the U.S. debt issue more to economic growth rather than solely relying on Treasury market operations. Trump shifted focus to fiscal restructuring. Trump emphasized that economic growth could independently resolve the U.S. national debt issue, resonating with recent fiscal policy signals released by Mnuchin. On Thursday, Mnuchin revealed that Trump had tasked him with jointly leading a new fiscal restructuring plan with the Director of the Office of Management and Budget, which is expected to be announced this weekend or next week. This means that while the Treasury is enhancing liquidity in the long-end Treasury market through repurchases, the Trump administration is also attempting to respond to market concerns about the sustainability of U.S. debt from the fiscal expenditure side. The U.S. national debt has surpassed $40 trillion, and persistent high long-term Treasury yields mean that government financing costs are rising further. Reuters previously pointed out that fiscal deficits, inflation pressures, and the financing needs of companies, particularly those related to AI, are all structural pressures faced by long-end yields recently. However, whether the Treasury's repurchase can change this trend remains a point of caution for the market. After the Treasury expanded its repurchase operations, the 30-year Treasury yield only briefly declined before rising again, indicating that investors do not perceive the repurchase as sufficient to resolve long-term debt supply and demand issues. Trump's emphasis on economic growth offers an alternative policy logic: if the U.S. economy and productivity can continue to grow, the expanded economic scale could ultimately reduce the debt burden. Turning to the Iran issue, Trumps remarks on Friday stressed the possibility of "pressure + negotiation" rather than merely emphasizing sanctions. Trump stated that the U.S. has thoroughly controlled the entire region, and that Iran might ultimately reach an agreement with the U.S., but is currently not ready to do so. This suggests that while the Trump administration continues to escalate economic pressure on Iran, the White House has not completely closed the door to diplomatic negotiations. On Thursday, Mnuchin signaled an even tougher economic stance. He mentioned that the U.S. was prepared to implement unprecedented economic isolation measures against Iran and disclosed that the U.S. would hold a press conference on August 24, next Monday, to specifically outline its action plan against Iran. Reports indicate that the Trump administration is attempting to further reinforce economic and financial pressure to force Iran to make concessions. Mnuchin had also previously stated that the current round of economic pressure might reduce the necessity for the U.S. to reinitiate large-scale military actions. Trump's assertion on Friday that Iran is still not ready to reach an agreement indicates that Washington is currently in a phase of continuing pressure while awaiting Tehran to change its stance. Oil prices become another test for Iran's pressure strategy. The importance of the Iran issue to U.S. economic policy also lies in energy prices. Mnuchin mentioned on Thursday that he didnt understand why oil prices suddenly spiked that day, adding that the upcoming economic actions from the U.S. would drive oil prices down more quickly. However, recently oil prices have become a significant risk variable for the long-term U.S. Treasury market. If the situation in Iran further inflates crude oil prices, it could exacerbate U.S. inflation pressures and transmit those pressures through inflation expectations and Federal Reserve policy expectations to long-term Treasury yields. This means that after the U.S. announces specific economic actions against Iran on Monday, the market will pay attention not only to the sanctions themselves but also to their actual impact on Iranian oil exports, regional supply, and global oil prices. Trump stated that U.S.-Canada negotiations are progressing smoothly, and that a new agreement with Mexico has been initiated. On North American trade issues, Trump released a relatively positive signal on Friday. Discussing trade relations between the U.S., Canada, and Mexico, Trump stated that the U.S. should be able to reach an agreement with Canada, adding that negotiations are currently progressing smoothly. Meanwhile, Trump disclosed that the U.S. has initiated a new agreement with Mexico. This means that against the backdrop of the USMCA framework being subject to readjustment, the Trump administration is advancing separate trade negotiations with Canada and Mexico. If the U.S.-Canada negotiations ultimately achieve breakthroughs, it will help reduce uncertainty in North American trade policy; and the initiation of a new agreement with Mexico indicates that the U.S. government hopes to reshape the North American supply chain and trade rules through bilateral negotiations. This article is transferred from "Wall Street View," author: Li Dan, GMTEight editor: Li Cheng.