Marks Warns Treasury Bond Buybacks Ignore Root Causes of Rising US Rates
Oaktree Capital founder Howard Marks argues that recent U.S. Treasury efforts to suppress long-term interest rates through bond buybacks are cosmetic and fail to address underlying fiscal imbalances. Marks contends that rising yields reflect fundamental issues, including high inflation, massive deficits, and increased capital demand from AI infrastructure. He advises investors not to sell U.S. stocks in response to these fiscal concerns, noting that alternative assets carry their own risks. While the Treasury has expanded buyback operations, market reactions have been muted, with yields remaining elevated despite intervention.
Key points
- The 30-year U.S. Treasury bond yield reached a 19-year high of over 5.3% in August 2026, prompting the Treasury to double its long-dated buyback program to $4 billion per operation.
- Howard Marks criticizes these interventions as temporary fixes that do not address root causes, such as persistent inflation (3.7% PCE in July) and a federal deficit near 6% of GDP.
- Marks argues that the U.S. cannot perpetually spend more than it earns without eventually facing questions about its creditworthiness and the value of the dollar.
- Investors are advised to maintain exposure to U.S. stocks, as moving to non-dollar assets or non-U.S. companies introduces significant risks due to poorer growth prospects and stricter regulations abroad.
- The only sustainable solution, according to Marks, is fiscal responsibility, including higher taxes, reduced spending growth, and increased productivity through AI and pro-business policies.
Background
This memo is the third in a series by Howard Marks criticizing government attempts to override economic laws, following earlier memos in September 2024 and June 2025. It builds on previous concerns about fiscal discipline and the sustainability of U.S. debt, particularly in the context of a strong economy with low unemployment.
How outlets are covering it
Business Insider highlights Marks' advice against selling U.S. stocks, emphasizing that fiscal issues do not equate to market weakness. Traders Union, via Lyn Alden, frames the memo as a warning about fiscal-driven inflation and market dynamics. Marks himself contrasts the Treasury's 'whatever-it-takes' approach with the need for structural fiscal reform, citing Druckenmiller's view that artificial yield suppression is a subsidy to procrastination.
Why it matters
The debate over whether to intervene in bond markets or address underlying fiscal imbalances has significant implications for global financial stability, the value of the U.S. dollar, and long-term investment strategies. Marks' arguments underscore the risks of ignoring fundamental economic pressures in favor of short-term market management.
What to watch
Investors will likely monitor the effectiveness of Treasury buybacks and any further signals from the Federal Reserve regarding interest rates. The U.S. government may face increasing pressure to address fiscal deficits, though political will remains uncertain. Markets will continue to assess the sustainability of current debt levels and the potential impact on the dollar's reserve status.
- Shall We Repeal the Laws of Economics – Part III Oaktree Capital Management
- Oaktree’s Marks Says US Displays Total Lack of Fiscal Discipline Bloomberg.com
- Billionaire investor Howard Marks says don't dump stocks because you're worried about soaring US debt Business Insider
- Lyn Alden: Howard Marks shares new memo on fiscal-driven inflation Traders Union
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