By boldness of the beard
NEW YORK (Reuters) – A possible slowdown in the public budget withdrawal of the public budget of the public budget and the Scott Bessens Ministry of Treasury against the long -term debt in the short term in the short term to the bond market tensions with continued financial concerns.
The Federal Reserve minutes from January 28 to 29 that were released this week showed that officials weigh a possible stop or slowing down to reduce the public budget at the Federal Reserve Bank, known as the quantitative tightening (QT), where the ceiling of government debt is binding on the bank's ability Central to measure the liquidity of the market. Meanwhile, Bessent said in an interview with Bloomberg TV on Thursday that the expansion of government debt issuance for a long time is not on the table.
Treasury revenues, which are inversely transmitted to prices, fell after the Federal Reserve minutes on Wednesday and BESSENT interviewed more optimism to pay the returns on Thursday.
However, his statements have not disrupted the market expectations to increase government debt, as investors and analysts expect that the Treasury will eventually need more to compensate for the decrease in government revenues from the proposed tax cuts of President Donald Trump.
Brej Khurana, director of the fixed income portfolio in Witzton Management, said that it is encouraging that there will be the Treasury Secretary “realizing the costs of financing.” Besent said earlier this month that the Trump administration's focus would have a 10 -year treasury revenue.
“At the same time, if the returns are less materially, they are likely to make more tax cuts … if the returns decrease a lot, then I think Bessant will try to pressure the bonds with long times,” Khourana said.
JPMorgan analysts said in a note on Thursday about the fears of the bond market about excessive debt supply that could be in the background in the coming months, given the administration's focus on long -term returns. But they said that they still expect the large government borrowing needs in the coming fiscal year will lead to increases in long debt sales.
Trump plans to renew and expand the tax cuts he signed during his first presidency in 2017, which is scheduled to end at the end of this year. This deficit may increase by more than $ 4 trillion over the next ten years, and has estimated the Congress budget office.
Discounts in the Federal spending led by the government efficiency management in Illon Musk, as well as possible revenues from Trump's planned tariffs on imports, can help reduce the growth of deficit, although the extent of its effect is uncertain.
“Payment and dragging here is that on one side, you have what seems to be a meaningful increase in spending the deficit of the tax deal, and on the other hand, some savings can be found from DOGE, and perhaps some of the budget discounts said Brian Kennedy, a portfolio manager in Leomes. Sils & Companish.
“I don't think this changes our opinion that the long end of the cabinet curve will continue to struggle for performance,” Kennedy said. “Will Dog will be effective that you will save a useful amount of money to make up for these tax cuts? I am a little skeptical about it.”
Musk pledged to find $ 1 trillion of savings through its efforts to determine fraud and waste in the government.
Dog said on her website on Thursday that she had provided $ 55 billion since Trump took office on January 20, but the Mossk government's effort to cost costs has so far reduced hundreds of relatively small contracts that taxpayers say we have $ 8.5 billion, according to Reuters analysis This week is the partial data published by his team.
The market's ability to absorb the highest supply of government debt will be to some extent, to take advantage of the QT relaxation, as the central bank will start investing mature bonds instead of leaving them.
Federal Reserve lectures showed that officials are also considering switching into a bond wallet that reflects the entitlement to the distinctive treasury market. Treasurys at the Federal Reserve Currently tend towards long debts, so this indicates that, over time, it can re -invest in securities shorter.
“On the margin, this will reduce (but certainly does not remove) any increase in the size of the auction in the future in the 2S and 3S.”
They said: “However, the most related effect on any increase in the auction size will eventually come from the budget process in addition to the performance of tax revenues.”
(Participated in the reports of David Barbosia; edited by Paritosh Bansal and Andrea Richie)