Bessent Maintains Current Treasury Issuance Strategy in First Refunding Announcement
Scott Bessent has been confirmed as US Treasury Secretary, leading to the first quarterly refunding announcement under his tenure.
Key points include:
- The proportion of bills issued compared to coupons has significantly increased, a tactic usually reserved for crises.
- Bessent has previously criticized this strategy, advocating for a normalization of debt composition with more long-duration bonds.
- Lack of demand for long-duration bonds and concerns over fiscal deficits create challenges for this strategy.
- Bessent maintained the existing approach in the latest QRA, aligning with previous policies criticized by Yellen.
- Despite recommendations from TBAC, the Treasury will continue forward guidance on nominal coupon and FRN auction sizes for upcoming quarters.
This situation highlights ongoing tensions in US debt issuance strategies amid strong economic conditions.