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Almost every American with a mortgage refinanced in 2020 when rates hit record lows. Similarly, many countries seized the opportunity to issue 30-, 50-, and even 100-year bonds at historically low rates. Savers hated the 0% savings rate, but what a great time to be a borrower!
The U.S. Treasury was not one of those astute borrowers; instead, opting to issue record amounts of short-term debt to minimize immediate borrowing costs. While long-term rates were attractive, short-term rates were even lower—until 2022, when the yield curve inverted, making short-term borrowing more expensive than long-term alternatives. Despite this, the Treasury continued to rely heavily on short-term debt.
Now, with those Treasury bills and notes maturing, they must be refinanced at today’s higher rates. Newly appointed Treasury Secretary Scott Bessent and other officials have criticized this strategy, pushing for increased issuance of longer-term debt. Their shift in approach is unsettling Wall Street, as it could drive up Treasury yields and borrowing costs across the economy.
New Treasury secretary has criticized a borrowing strategy that helped calm markets
by Sam Goldfarb
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