Will Scott Bessent Have To Cut The Coupons?

11 thoughts on “Will Scott Bessent Have To Cut The Coupons?”

1. Thanks for the numbers on this. I have always thought of bill demand as practically limitless but I’m seeing there are practical limits.

   Where does SLR reform come into this? I cannot figure out how much of an increase in coupon demand it will really produce.

2. H — how do these current trends/flows with the unloved 30-year square with the recent proposal percolating to term out the debt via half-century or century bonds? Seems like those two things don’t go together. I also think it was you who wrote several years ago when many were calling for a term out back when rates were at their nadir, and (whoever) indicated that there was only so much shifting that could go on among bills and bonds, and that dramatically expanding 30-year issuance wasn’t feasible from a market structure perspective. Anyway, I hope that wasn’t all a dream or I gotta get out more.

   1. Well, I think it’s safe to say that if the long bond’s unloved, even longer ones (i.e., century bonds) are a no-go right now. Some of those proposals were a little more nuanced, and they generally involved some manner of coercion on the part of the US (e.g., if you want security guarantees, swap into these century bonds). As far as the “only so much shifting” part, note that in the illustrative scenario from the article, WAM only falls by a few months over two years (versus a baseline that’d decline anyway with coupon sizes left unchanged) as a result of the proposed issuance shift. This isn’t a ship you can turn on a dime either way.

3. That is a big assumption by MS on stable coin cap growth.

   What if the last remaining lemmings don’t like the latest color of the hybrid tulips offered?

   Are we not revisiting another Hunter, Lemar and Herbert period?

   Of course it helps to have the 800 lb orangatang in charge promoting it all.

   Perhaps their offspring are in the forefrunt of this “coin” movement.

   You know, last image I saw of Hunter, I can see Lutnick’s resemblance.

4. On a slightly more serious note,

   Would not much higher issuance at the short end keep/hike short rates higher?

   And if I recollect from a few decades ago, it is short rates and not rates way out on the curve that drive currency rates.

   So higher rates lead to a much less weaker USD, and how does that fit with currency devaluation driving improving the US position in trade dynamics?

   Let me answer my own question.

   I know, that is not how it works any longer.

   1. “Would not much higher issuance at the short end keep/hike short rates higher?”

      Not really/per se. Remember: We’re talking about bills here. The auction mechanics are different.

5. https://cdn.shopify.com/s/files/1/0105/4844/5231/files/huntbrotherscongress.jpg

6. H-Man, I guess it gets down to how much faith you have in our country to loan a $1 for 5% interest for the next 30 years? Personally, I don’t have much faith in that rate going lower especially with inflation at 3%. A net 2% (inflation adjusted) is not a great deal. 7% or 8% makes more sense.

7. Donnie Jr. was talking about how the Trump family stablecoins actually help support dollar hegemony. Once again, the Trump family doing their part to support America (and making hundreds of millions if not billions in the process).

   How so many people can’t see what a grift looks like is beyond me…

   1. Everyone should listen to this episode of the Ezra Klein show: https://www.nytimes.com/2025/05/28/opinion/ezra-klein-podcast-zeke-faux.html

      The crypto aspect of the Trump 2.0 saga is truly incredible, and that episode (which features a BBG investigative reporter) does a good job of summing it all up.

8. This is what happens when you put two guys who made their bones pretending to be entertainers together in charge of the world’s largest, but still fragile, economy.