(Bloomberg) -- Treasury Secretary Scott Bessent said that any move to boost the share of longer-term Treasuries in government debt issuance is some ways off, given current hurdles that include elevated inflation and the Federal Reserve's quantitative tightening program.
"That's a long way off, and we're going to see what the market wants," Bessent said in an interview with Bloomberg Television's Bloomberg Surveillance on Thursday, when asked about "terming out" sales of US Treasuries sales. "It's going to be path dependent."
Before he came into office, Bessent had repeatedly criticized then-Treasury Secretary Janet Yellen for boosting the share of bills, which mature in up to a year, in US debt — something he argued held down longer-term yields and was done to boost the economy before the election. Yet Bessent retained the Yellen team's plan for debt issuance earlier this month.
Asked about his past comments, Bessent said Thursday "the previous administration shortened some of the duration, and we haven't shortened it further."
"We're still seeing, sort of, the Bidenflation that's still coming through," he said. "As the market starts to realize what we're doing, and if inflation starts to drop, then we will see — so it's going to be path dependent," he said of stepping up longer-term debt sales. "That's the eventual goal, but I'm not going to signal it now."
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In a wide-ranging interview that touched on issues from China and Ukraine to Elon Musk's energy level, Bessent reiterated his argument that, with cost savings from Musk's DOGE efficiency drive, that should help bring down spending. Deregulation, tax cuts and an expansion in US energy supplies will ensure non-inflationary growth, and provide the basis for a drop in longer-term yields, he said.
Longer-dated US Treasuries rose after Bessent's comments. Ten-year yields were down about 4 basis points, at 4.50% as of 10:06 a.m. in New York. Yields remain well above their pre-pandemic levels, when they languished below 2%.
Bessent noted the Fed is currently shrinking its own holdings of Treasuries — creating, in effect, a competing seller of debt to the market. Minutes of the latest Fed meeting showed policymakers discussed pausing or slowing the quantitative tightening program.
"The Fed said that they may stop their balance sheet runoff," Bessent said. It would be "easier for me to extend duration when I'm not competing with another big seller." He also said that he met with Fed Chair Jerome Powell on Wednesday, and would continue his practice of not commenting publicly on current monetary policy.
Bessent dismissed recent market speculation that the government might revalue its holdings of gold in an effort to reduce US borrowing needs, or for the purpose of funding the creation of a sovereign wealth fund.
"When we were talking about the sovereign wealth fund, and I said, 'monetize the balance sheet,' I promise you, that's not what I had in mind," Bessent said when asked about revaluing the gold. Pressed on whether it's on the table, he repeated, "That's not what I had in mind."
The reserves are currently valued at $42.22 per ounce, a legacy official price from decades ago. Revaluing them based on current market prices could boost the calculation to roughly $750 billion from $11 billion.
The Treasury chief said he had no plans to visit Fort Knox, Kentucky — where much of the US gold reserve is kept — but he assured "all the gold is there" and any senator is welcome to visit to see it.
Turning to China, Bessent reiterated his view that the world's second-largest economy is dangerously unbalanced, and is attempting to rely on exports to other nations to get it out of a recession.
"I do have my first call with my Chinese counterpart tomorrow morning, so I look forward to a very productive discussion," he said. "This is really just an introductory conversation, but as we go down the road, the Chinese need to rebalance their economy in favor of consumption."
Vice Premier He Lifeng was Yellen's counterpart during the previous administration, and met with her when Yellen visited Beijing last April. While next week's Group of 20 gathering of finance chiefs from the world's top economies might have served as a venue for Bessent to meet Chinese officials, he isn't making the trip to South Africa. Bessent said "the readout that we've gotten" indicates that his Chinese counterpart also won't be going to Cape Town.
Asked about China's exchange rate, Bessent — who specialized in currency trading as a hedge fund investor — said the yuan is a "very difficult currency to value." On any academic model, such as a purchasing-power parity calculation, "it's cheap," he said. He also pointed to pressures for funds to flow out of the country, saying that Chinese people currently subject to capital controls "want to get some of their money out of the country."
"The X factor" with regard to the yuan is questions about whether foreign investors putting money into the country would be able to withdraw it after a period of years, Bessent said. "So it's very difficult to come up with a point value of the currency," he summed up.
Bessent reiterated that "the US still has a strong dollar policy," and that "we will necessarily have a strong dollar if we run good policies."
The Treasury secretary continued to defend the DOGE cost-cutting drive, saying "I really do think it's unfortunate that it's been lampooned" by critics. He also said that Musk, along with other "great businesspeople" like his former hedge fund colleague Stan Druckenmiller, are like professional sports stars such as Michael Jordan or Lionel Messi. Musk's "energy level is unbelievable," he said.
(Updates with comments on Musk in final paragraph. An earlier version of this story corrected Fort Knox's state.)
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