Forget the Federal Reserve. To lower borrowing costs for Americans, the Trump administration says it is going to cut spending and increase energy production.
Although President Trump continues urging the Fed to reduce short-term interest rates, Treasury Secretary Scott Bessent has suggested recently that both he and Trump are focusing less on the central bank and more on bringing down the key rate set by financial markets: the yield on the 10-year Treasury note.
The task isn't easy. A benchmark for rates on everything from mortgages to corporate bonds, the 10-year yield shifts with market and economic forces largely beyond the control of the White House. Yields on Treasurys fall when their prices rise, so any effort to lower them would either need to reduce government borrowing -- thereby decreasing the supply of bonds -- or make U.S. debt more appealing to investors.
The most obvious way that presidents can move Treasury yields is through fiscal policy. A smaller budget deficit means less government borrowing and a reduced supply of new Treasurys. That can push up the prices of existing bonds, driving their yields lower.
Bessent recently leaned into this idea in an interview with Bloomberg Television, arguing that the 10-year yield could decline if the Elon Musk-led Department of Government Efficiency is able to reduce government spending.
Administrations also have discretion over the types of debt they issue. To avoid putting pressure on longer-term yields, Treasury can issue more T-bills, which mature in a year or less, rather than notes and bonds that carry two- to 30-year maturities.
Bessent had previously criticized the Biden administration for relying too much on T-bills and suggested that issuance of longer-term debt might need to increase. But he took a different position in the ...
