By a bold beard
New York (Reuters) – Possible to pull down the Federal Fund's balance sheet and assurance of the Secretary of the Treasury Scott Bessent against upcoming long -term debt hikes offered relief in the near term to bond jitters the market as financial is financial -related .
Minutes fed from the January 28-29 rate set meeting released this week showed that officers are weighing a potential pause or slowing down the Fed's balance sheet reduction, known as quantitative tightening (QT), as the Government binding debt cap could complicate capacity ' the central bank to measure the liquidity of the market. In the meantime, Bessent said in an interview with Bloomberg Television on Thursday that, for the time being, it is not expanding the announcement of a long -dated government debt on the board.
Treasury products, which move inverted to prices, decreased after the Fed minutes on Wednesday and a Bessent optimism interview further pushed a lower product on Thursday.
Yet, his comments did not impair the market expectations of more government debt, as investors and analysts predict that the Treasury will ultimately need to borrow more to make up for a reduction in government revenue of tax cuts President Donald Trump's proposed.
Brij Khurana, fixed income portfolio manager at Wellington Management, said it was encouraging to have a Treasury Secretary “who is aware of the funding costs.” Bessent said earlier this month Trump's administration was to include Treasury products 10 years benchmark.
“At the same time, if a product is significantly lower then they are going to make more tax cuts … If a product goes much lower, I think Bessent would Trying to push into longer dated bonds, “Khurana said.
Analysts in JPMorgan said in a note on Thursday that bond market concerns about excessive debt supply could retreat to the background over the coming months, given the administration on long -term produce. But they said they still expected the borrowing needs of a large government in the next financial year will lead to an increase in long-dated debt sales.
Trump intends to renew and expand tax cuts that signed law during his first presidency in 2017, which is about to end at the end of this year. This could increase deficiencies over $ 4 trillion over the next 10 years, the Congressional Budget Office has estimated.
Federal spending cuts driven by the Government's efficiency department Elon Musk (Doge), along with potential revenue of Trump's proposed tariffs on imports, could help curb the growth of deficiency, although the extent of their effect is uncertain.