Bessent says Treasury to adjust issuance gradually, sees robust market aiding affordability

[Treasury Secretary Scott Bessent Speaks To Reporters Outside The White House]

Treasury Secretary Scott Bessent said the Treasury will adjust coupon issuance gradually to avoid market disruption and that the U.S. Treasury market is more "robust and more liquid than it’s ever been."

He noted the U.S. Treasury market has been the best-performing developed bond market this year, delivering a total return of about 6% year-to-date, its best year since 2020.

Bessent, who was speaking at a Treasury Market Conference in New York, said the Treasury will stick to the "regular and predictable" issuance framework as it has proven to be the most effective means of achieving its goals.

"We will remain analytical in our decision-making, adjusting issuance gradually to avoid market disruptions. We will provide public forward guidance to the extent practicable. And we will regularly canvass the market for feedback on how our issuance decisions are being received," Bessent said.

The Treasury is also unlikely to alter coupon auction sizes for at least the next several quarters. "Existing financing capacity from current auction sizes and robust demand in the bill market have given us flexibility to manage our upcoming potential borrowing needs," Bessent added.

Bessent said there is also a growing demand for Treasury bills from money market funds and stablecoin providers, along with increased demand from banks as they look to "shake off the excessive oversight that held them back." He also added that the Treasury is supportive of reforms to the banks' enhanced supplementary leverage ratio.

"Expanding central clearing is also key to strengthening markets. The SEC is currently leading an effort to expand central clearing in the Treasury market, which will enhance resilience, expand netting opportunities, and standardize risk management," he said.

Bessent said Treasury has expanded the size of long-end operations under its buyback program and plans to broaden the counterparty set in the first half of next year to boost liquidity.

While the Treasury is maintaining its "regular and predictable" framework, it does not mean that its issuance policy will not evolve if the investors' demand changes, said Bessent, adding, "If our borrowing outlook changes, so will the amount we issue. And if structural demand for certain products or tenors evolves over time, we will be responsive and adjust how we allocate issuance accordingly."

Bessent said that the recent developments, which include the reduction of the national deficit and the FOMC's announcement that it will start buying Treasury bills with proceeds from their MBS holdings, have given the Treasury more time and flexibility.

"As such, we will continue to monitor trends in investor demand. And we will continue to consider where and if additional issuance could best achieve Treasury’s debt management goals. When and if the time comes to make changes, we will be prepared, and we will socialize our plans with market participants," he said.

Bessent also said a robust Treasury market—and strengthening it even further—is “essential to Making America Affordable Again,” echoing the administration’s broader focus on improving affordability.

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