Bescent: Expected to sign a series of new trade agreements, currently issuing long-term bonds is meaningless, stablecoin legislation may be introduced in mid-July

On Monday, U.S. Treasury Secretary Becerra stated that he expects to sign a series of new trade agreements before the July 9 deadline set by the United States; given the current yield levels, it is unreasonable for the U.S. government to expand the issuance of long-term government bonds. Regarding Powell's successor, Becerra mentioned two possibilities: appointing a new member or selecting from the existing Federal Reserve Board members. He also indicated that stablecoin legislation may be introduced before mid-July.

New Trade Agreements Coming Soon

Becerra stated on Monday that he expects to sign a series of new trade agreements before the July 9 deadline set by the United States. "Entering the final week, with increasing pressure, there will be a wave of announcements. The Treasury Department, the Office of the Trade Representative, and the Department of Commerce, people who have worked in these departments for twenty years are shocked, saying the conditions proposed by these countries are unbelievable."

Becerra also mentioned that even though relevant negotiations are still ongoing, countries negotiating trade agreements with the United States may still face significant tariff increases by July 9. He stated that the decision to extend this deadline is entirely in the hands of President Trump. Although Trump has previously indicated a possibility of remaining flexible, he has not committed to postponing.

Becerra noted, "We have some countries negotiating in good faith, but they should be aware that if we cannot reach an agreement, tariffs may revert to the levels of April 2."

He described the upcoming situation as a "last-minute trading frenzy," but also warned that countries perceived as deliberately delaying may face comprehensive tariff increases.

Expanding Long-term Bond Issuance is Unreasonable

U.S. Treasury Secretary Becerra stated that given the current yield levels, it is unreasonable for the U.S. government to expand the issuance of long-term government bonds, although he still hopes that as inflation slows, interest rates across all maturities will decline. In a media interview on Monday, when asked whether the proportion of long-term U.S. Treasury bonds in the Treasury's debt issuance should be increased, he responded:

Why should we do that? The right time to do that was in 2021 and 2022.

Why should we do that at the current interest rate levels? Our rates are already more than one standard deviation above long-term levels.

Becerra has criticized former U.S. Treasury Secretary Yellen multiple times last year for relying too much on short-term government bonds in debt issuance, claiming the purpose was to maintain lower long-term borrowing costs and stimulate the economy before the election. However, since taking office, he has continued Yellen's debt issuance strategy.

Currently, the yield on the 10-year U.S. Treasury bond is about 4.26%, while the 2-year yield is 3.73%, and the 12-month bill is 3.81%. When asked about the expectations for the 10-year U.S. Treasury yield by the end of the year, Becerra stated that it would depend on multiple factors, but as inflation declines, he believes the entire yield curve may shift downward.

Two Possibilities for Powell's Successor

Becerra also mentioned that Federal Reserve policymakers seem to be somewhat stagnant in their interest rate decisions. He pointed out, "What I worry about is that the Federal Reserve did not perform well for the American people in 2022, and now they are looking down instead of looking forward." He also noted, "We have not seen any inflation from tariffs," and stated that in terms of its impact on consumer prices, nothing is more temporary than import tariffs Powell's term as Chairman of the Federal Reserve will end in May 2026, while his board member term will last until 2028. Earlier this month, Powell declined to disclose whether he would be willing to remain on the Federal Reserve Board after his chairmanship ends. Federal Reserve Governor Quarles' term will end in January next year.

When asked about the succession plans for Federal Reserve Chairman Powell, Bessenet mentioned two possibilities: appointing a new member to fill the vacancy in January or selecting someone from the current Federal Reserve governors to serve as chairman. He stated, "Clearly, some individuals currently within the Federal Reserve are being considered." He did not disclose specific candidates.

Federal Reserve observers noted that Governor Waller could be a potential successor to Powell, as Waller has indicated that policymakers might cut rates as early as July. Waller was nominated to the Federal Reserve Board during Trump's first term.

Bessenet is responsible for advising the president on Federal Reserve personnel appointments, and he emphasized that a 14-year position vacancy will arise in January. Therefore, it has been considered that this person may eventually succeed Powell as chairman after he departs in May next year. Bessenet added, "Unfortunately, Powell's board seat is only a two-year term."

When asked if he would be willing to serve as Federal Reserve Chairman, Bessenet stated he would defer to Trump's decision. "I will do whatever the president asks me to do," and he added that he is currently satisfied with his position as U.S. Secretary of the Treasury.

Stablecoin Legislation

Bessenet also stated that stablecoin legislation could be completed by mid-July, which would become a source of demand for U.S. Treasury securities