Big takeaways from Bessent’s first quarterly refunding announcement

All eyes were on Bessent to see if he would change the composition of issuance back toward normalization

article-image

christianthiel.net/Shutterstock modified by Blockworks

share


This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.


With the recent confirmation of Scott Bessent as US Treasury Secretary, we’ve received the first quarterly refunding announcement under his leadership.

Much has been written in the past year about the potential politicization of the composition of debt being issued by Treasury and how that could impact markets. 

As seen below, the proportion of bills that have been issued compared to coupons has skyrocketed. Historically, this type of maneuver has been kept for times of crisis when Treasury needs to raise a lot of money very quickly, with little impact to duration. 

However, this has occurred in a regime of exceptional economic strength.

Before being nominated as secretary, Bessent was publicly critical of this strategy. He discussed his belief that it was essential for the composition of issued debt to get normalized — meaning an increase in proportion of longer-duration debt being issued. 

Though admirable, this strategy would be very precarious due to the lack of structural demand for long-duration bonds without the Fed buying for QE, foreign central banks becoming net sellers of long-term debt, and concerns about fiscal deficits increasing. 

With that context, all eyes were on this week’s QRA to see whether Bessent would change the composition of issuance back toward normalization. 

As seen in the chart below of the estimate for borrowing for the next two quarters, Bessent has toed the line and kept the policy approach he criticized Yellen for:

What’s even more interesting is the commitment to the forward guidance of this issuance that was introduced last year, guidance the Treasury decided to keep despite recommendations from TBAC to remove it:

“In discussing issuance recommendations, the committee uniformly encouraged Treasury to consider removing or modifying the forward guidance on nominal coupon and FRN auction sizes that has been in the refunding statement for the past four quarters. Some members preferred dropping the language altogether to reflect the uncertain outlook, though the majority preferred moderating the language at this meeting.”

Despite this recommendation, Treasury kept the following commitment:

“Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters.”

So what’s the takeaway? I’ll leave it with a meme:


Get the news in your inbox. Explore Blockworks newsletters:

  • Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
  • Empire: Start your morning with the top news and analysis to inform your day in crypto.
  • Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
  • 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
  • Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
  • The Drop: For crypto collectors and traders, covering apps, games, memes and more.
Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research

article-image

BWR analyst Carlos Gonzalez Campo explains the consequences of SOL inflation and transfers lost to “leaky buckets”

article-image

Empire co-host Santiago Santos makes the case that memecoins have actually helped push infra forward…just not in the way you think

article-image

A16z Crypto lists seven buckets for tokens and recommendations for how to regulate them, in a filing submitted to the SEC

article-image

New model aims to resolve trading inefficiencies with a single execution layer and market maker changes

article-image

Investors navigating BTC face short-term unpredictability, influence from other markets

article-image

The GENIUS Act aims to establish regulatory guidelines for stablecoins