Bessent doubles down on short-term debt as rates turn

Treasury Secretary Scott Bessent is continuing the strategy of funding the U.S. deficit primarily with short-term Treasury bills, despite previously criticizing the approach. About 85% of recent debt issuance has been in bills maturing within a year, leaving roughly 33% of outstanding federal debt due within 12 months. This strategy faces increasing risk as the Federal Reserve under new Chair Kevin Warsh signals potential rate hikes rather than cuts, with half of Fed policymakers penciling in increases and Bank of America forecasting three quarter-point hikes this year. The article notes that short-term debt reprices quickly, which is beneficial when rates fall but dangerous when they rise. Additionally, the Treasury faces increased competition from hyperscalers issuing debt for AI infrastructure and Germany's 800 billion euro defense borrowing plan, putting upward pressure on yields across the board.