Treasury Secretary Scott Bessent’s debt-management team has rebuffed Wall Street suggestions to tweak its guidance for future sales of US Treasuries for so long now that many dealers have abandoned predicting a change anytime soon.
Ahead of a quarterly policy statement on debt strategy Wednesday, most dealers see the Treasury reiterating it expects no increases in note and bond issuance “for at least the next several quarters.” That forward guidance dates back to the Biden administration, and was once criticized by Bessent as designed to tamp down longer-term borrowing costs ahead of the November 2024 election.
Today, it’s President Donald Trump’s Republicans facing midterm elections, with every interest in avoiding any further climb in yields — the potential result of any signal of increased auction sizes. Yields on 30-year bonds last week already hit their highest levels since 2007, making them so costly compared with shorter maturities that many dealers doubt the Treasury will boost their sales at all in coming years.
Bessent since taking office has relied on bills, which mature in up to a year, to meet the government’s increasing borrowing needs. As their rates are lower, that’s helped temper the Treasury’s costs. But the strategy comes with risks: continuing to lean on bills means debt-servicing costs become sensitive to front-end rate shocks, at a time when investors are betting the Federal Reserve will be forced to tighten monetary policy over the coming months.
