US TSYS/SUPPLY: Tsy Sec Bessent Lays Out Rough Roadmap To Longer Duration Mix

Treasury Secretary Bessent this morning on Bloomberg laid out a rough roadmap to extending the Treasury's issuance duration mix, and in the most explicit terms yet tying it to the Fed ending QT. 

• The plan appears to be: 1) carry on with the existing issuance mix for at least a couple of quarters (in accordance with the latest Refunding guidance), 2) allow the Trump administration's policies time to get inflation down and the deficit reduced, thereby getting long-end rates down and reducing net borrowing needs, and as a bonus, 3) taking advantage of Fed balance sheet runoff ending - and then, shifting to a longer-term issuance profile.
• Assuming all goes to plan - and a lot can go wrong in the above - it looks roughly speaking like Treasury would be eyeing such a shift later this year or early in 2026. (Notably it doesn't look like he is interested in any gimmicky workarounds, for instance denying that he was thinking about revaluing the government's gold stocks upward.)
• So far, Bessent says, his Treasury has just kept the Yellen Treasury's duration mix - which had leaned more toward bills rather than extending duration - "in place".
• But he said that "I believe over the medium term, it's going to play out as it becomes clear that everything that President Trump's administration is doing will bring will be disinflationary, but we're going to bring down energy costs. We're going to bring down regulation, what Doge is doing in terms of cost cutting. And I think once the Tax Cuts and Jobs Act is made permanent, then we can have a revenue increase, cost decrease."
• Asked whether the plan is to term out the maturity of Treasury's debt profile, Bessent said "that's a long way off, and we're going to see what the market wants", adding that in the just-released January FOMC minutes "the Fed said that they may stop their balance sheet runoff. So easier for me to extend duration when I'm not competing with another big seller."
• Asked whether this could happen later this year, or later, Bessent appeared to be open-minded on the timeline "it's going to be path dependent. We're still seeing sort of the residual 'Bidenflation' that's still coming through. And I think as the market starts to realize what we're doing, and inflation starts to drop, then we will see, so it's going to be path dependent. That's the eventual goal. But I'm not going to signal it now."