Trump Focuses on Lowering 10-Year Treasury Yields to Impact Markets
US Treasury Secretary Scott Bessent outlined a new economic strategy focused on lowering borrowing costs by reducing the 10-year Treasury yield. He clarified that President Trump is not pushing for a Federal Reserve rate cut but is concentrating on the 10-year yield.
Bessent stated:
- The 10-year yield impacts borrowing costs, influencing mortgages and business loans.
- A declining yield can signal bullish momentum for risk assets, including Bitcoin.
- Lower inflation may allow the Fed to cut interest rates, benefiting asset prices.
- The administration aims to increase energy production to combat inflation.
Impact of Recent Fed Actions
The Federal Reserve has already reduced its benchmark rate by 100 basis points since September, with potential further reductions if inflation continues to decrease, positively affecting both traditional markets and cryptocurrency.
Trump’s "3-3-3" Strategy
Bessent introduced a strategy to reduce the US budget deficit, focusing on fiscal spending cuts. Key elements include:
- Targeting a fiscal deficit of 3% of GDP.
- Increasing oil production by 3 million barrels per day.
- Maintaining economic growth at 3%.
Bessent expressed confidence in this strategy, emphasizing private-sector-led growth driven by investment and domestic manufacturing.
Concerns Over Fiscal Changes
A reduction in government spending could lead to market volatility, especially for risk assets like Bitcoin, due to decreased liquidity. However, a stable fiscal outlook might restore investor confidence for sustainable growth.
Bessent also addressed the impending expiration of Trump’s 2017 tax cuts, confirming efforts to make them permanent. Additionally, he reiterated that no external entity influences Treasury transactions.