U.S. Treasury Secretary Janet Yellen: There is still a long way to go to increase the issuance scale of long-term U.S. Treasury bonds
U.S. Treasury Secretary Becerra stated that due to rising inflation and the Federal Reserve's quantitative tightening policy, it will take time to increase the issuance scale of long-term U.S. Treasury bonds. He criticized former Treasury Secretary Yellen for suppressing long-term Treasury bond sales to support the economy. Although Becerra believes that inflation will decline and support a drop in long-term Treasury bond yields, the Treasury Department maintains the quarterly refinancing scale of $125 billion for long-term bonds unchanged. The Federal Reserve's reduction in bond holdings has brought competition to the market, and Becerra pointed out that stopping the reduction of the balance sheet would help extend the duration of bonds
According to the Zhitong Finance APP, U.S. Treasury Secretary Ben S. Bernanke stated on Thursday that given the current obstacles—including rising inflation and the Federal Reserve's quantitative tightening policy—any measures to increase the proportion of long-term U.S. Treasury bonds in government bond issuance will take some time to achieve.
Bernanke and some Republicans previously accused former Treasury Secretary Janet Yellen of "deliberately suppressing the sale of long-term U.S. Treasury bonds," thereby lowering long-term borrowing rates to support the economy before the election. In a column last November, Bernanke stated that the Treasury should shift to a more orthodox borrowing structure, namely increasing the proportion of long-term U.S. Treasury bonds.
However, Bernanke quickly contradicted himself after taking office. The U.S. Treasury released its quarterly financing statement earlier this month, maintaining the scale of $125 billion for long-term bond quarterly refinancing auctions and continued to reiterate that it does not expect to increase the bond issuance scale "in the coming quarters."
Bernanke reiterated his view that inflation will decline due to cost savings driven by the Department of Efficiency (DOGE), deregulation, and tax cuts rather than government spending, along with the expansion of U.S. energy supply. He stated that this would provide a basis for the decline in long-term U.S. Treasury bond yields.
Following Bernanke's remarks, long-term U.S. Treasury bond prices rose, and the benchmark 10-year U.S. Treasury yield fell by about 3 basis points to 4.51%. However, this yield is still well above pre-pandemic levels, when the 10-year U.S. Treasury yield was below 2%.
Additionally, Bernanke pointed out that the Federal Reserve is currently reducing its holdings of U.S. Treasury bonds, which effectively creates a competing bond seller in the market. The minutes from the Fed's most recent meeting indicated that policymakers discussed pausing or slowing down quantitative tightening. In response, Bernanke stated, "The Fed indicated that they might stop reducing the balance sheet. When not competing with other large sellers, extending the duration of bonds is easier for me."