Scott Bessent, the U.S. Secretary of the Treasury, is currently deploying strategies including $6 billion in bond buybacks and global currency market interventions to stem an ongoing selloff in U.S. bonds. His current role places him at the center of macroeconomic management, a position that contrasts sharply with his earlier career as a hedge fund manager who profited from currency crises.
Before founding Key Square Group, Bessent worked for George Soros, the Democratic megadonor and philanthropist. In the 1990s, Bessent served as managing partner at Soros Fund Management's London office. During this period, he worked alongside Soros and Stanley Druckenmiller on a massive short position against the British pound. The team assessed that the Bank of England was too weak to support the pound against the German Deutschmark, particularly as the United Kingdom faced recession while the reunified German economy boomed.
Soros's fund held approximately $5 billion in assets under management at the time. According to NPR, Soros authorized his team to borrow up to $15 billion to amplify the short position. As economic conditions in the U.K. deteriorated, firm managers increased their exposure. On September 16, 1992, known as Black Wednesday, the British pound faced intense selling pressure. Fortune reported that Soros realized roughly $1 billion in profit from this single trade, earning him the nickname "The man who broke the Bank of England."
Bessent eventually rose to become chief investment officer at Soros's hedge fund. He was also involved in a separate trade against the Japanese yen. The Guardian reported that this specific trade generated approximately $1.2 billion in profits for Soros's fund. Later, The New York Times reported that Soros sent $2 billion to support Bessent's new venture, Key Square Group. However, details from The New York Times suggest that two years after this transfer, Soros asked Bessent to return the funds, and the former colleagues are reportedly no longer speaking.
The political divergence between the two men is stark. Newsweek reported that Bessent shifted his political donations from Democrats to conservative causes and candidates around 2016, including President Donald Trump. In contrast, Soros has donated $32 billion since 1984 through his Open Society Foundations, primarily to left-leaning causes and candidates.
Current events have created a notable irony regarding Bessent's track record. This July, Bessent led an effort to strengthen the Japanese yen, the same currency he shorted previously to generate $1.2 billion in gains for Soros. Treasury data indicates that Japan holds the most U.S. debt, making its stability crucial for the U.S. bond market. Bessent addressed investors at Southern Methodist University, telling The New York Times that he possesses superior information and aims to create good framing to prevent panic.
Despite these assurances, market conditions remain tense. Sellers of U.S. bonds still outnumber buyers, and interest rates for long-dated instruments such as the 30-year and 20-year bonds remain at multi-year highs.