Tough for Scott Bessent to win the war against bond vigilantes, says analyst

• U.S. Treasury's debt buyback operation is seen as symbolic and insufficient given the $32 trillion market and persistent 6% GDP budget deficits.
• Global yields are rising across major economies, driven by increased government and corporate debt issuance (e.g., $4 trillion for AI build).
• AI and digitalization are viewed as disinflationary due to productivity gains, but geopolitical conflicts and fiscal stimulus contribute to inflationary pressures.
• Credit risk concentration is a key concern, though strong earnings growth in AI-related companies (e.g., South Korea's KOSPI up 87% with 185% earnings growth) provides some bullish signals.

Rich Nuzum of Franklin Templeton discusses the challenges faced by the U.S. Treasury in managing debt and yields, despite recent buyback operations. He highlights the impact of large budget deficits, increasing debt issuance for AI infrastructure, and global inflationary pressures from conflicts, while also noting disinflationary forces from AI productivity and strong earnings growth in tech-related sectors.