U.S. Treasury to raise $1 trillion this quarter via short-term debt as strategy shifts under Bessent

The U.S. Treasury plans to raise approximately $1 trillion in the July–September quarter through increased issuance of short-term debt, according to the latest announcement. This marks a shift in strategy for Treasury Secretary Scott Bessent, who previously criticized similar tactics used under former Treasury Secretary Janet Yellen. The department confirmed that auction sizes for long-term bonds will remain unchanged for several quarters, pushing the burden of short-term borrowing to fill the funding gap [1].

The move aligns with a broader strategy to manage federal expenses while navigating the constraints imposed by the debt ceiling. Short-term debt, which matures in one year or less, allows the Treasury to borrow aggressively without immediately influencing long-term interest rates. However, it introduces volatility, as short-term debt must be continuously refinanced at current market rates, exposing the government to potential interest rate spikes [1].

Economists have long debated the implications of such an approach. Critics, including Stephen Miran and Nouriel Roubini, have labeled it “activist Treasury issuance,” suggesting it blurs the lines between fiscal and monetary policy. Miran, now a key economic adviser to President Donald Trump, argues that the strategy may undermine the Federal Reserve’s role in setting interest rates [1].

In a public statement, Bessent also addressed the Federal Reserve, dismissing expectations of an imminent rate cut. He urged the central bank to adopt a more imaginative approach to monetary policy and criticized its assessment of the inflationary impact of Trump’s proposed tariffs. Bessent suggested that rising tariffs could, in fact, help secure international cooperation, and he downplayed concerns over the August 1 trade deadline, stating that negotiations could extend beyond that date [1].

Bessent also highlighted recent trade developments, noting that agreements with Japan and the European Union have influenced ongoing discussions with China. He claimed the Chinese delegation was on the defensive and that the U.S. now has broad international support in trade negotiations [1].

While the strategy of relying on short-term debt offers flexibility in the short run, it carries risks that could amplify federal borrowing costs if interest rates rise unexpectedly. As the Treasury moves forward, it will need to balance fiscal discipline with the realities of a rapidly shifting economic landscape.

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Source: [1] U.S. Treasury to raise $1 trillion this quarter selling more short-term debt (https://coinmarketcap.com/community/articles/688a46297481f37f58358ffe/)