Bessent Says Fed Should Cut Rates

Yields fall on Treasury Secretary Bessent’s comments. The recent rally in Treasurys resumed today after Secretary Bessent said the U.S. will avoid issuing longer-term debt. The comments pushed the long-end of the curve 5-6 bps lower while the short-end declined by only 3 bps. 2-year and 10-year yields are currently 3.72% and 4.23%, respectively, both down ~18 bps on the month. Meanwhile, the S&P 500 (+0.52%) and NASDAQ (+0.47%) extended their all-time highs today, now near 6,205 and 20,370, respectively.

Bessent criticizes Fed, says U.S. will avoid long term debt issuance. Treasury Secretary Bessent partially fueled today’s bull flattener after he said that the U.S. will refrain from long-term debt issuance. He argued, “Why would we do it at these rates, if we are more than one standard deviation above the long-term rate.” He also said that the curve should shift down as inflation slows. Meanwhile, Bessent argued the Fed should cut rates now because “We have seen no inflation from tariffs” and “nothing is more transitory” than tariff-driven inflation. He fears that the Fed is “frozen” due to their mistakes of 2022, where inflationary pressures were overlooked.

Senate races to meet self-imposed Tax Bill voting deadline. The Senate advanced their early version of the “One Big Beautiful Bill Act” late Saturday night, moving it closer to a final vote. As Senate Republicans hurry to pass a bill by their July 4th self-imposed deadline, today the chamber began voting on proposed amendments. Democrats have used the amendment process to capitalize on disagreements within the Republican bloc on items ranging from the appropriate degree of cuts to social safety programs, such as Medicaid, to how best to wind down Biden-era clean energy tax credits. As of now, Republicans have defeated all efforts to modify or stall the bill, but their biggest obstacle is convincing enough party-detractors to vote for the measure. When asked if he was confident that the bill would pass, Senate Majority Leader John Thune said, “Never until we vote.” Treasury Secretary Bessent, on the other hand, was more optimistic, saying, “I’m confident that the bill is going to progress as-is…and it will be on the president’s desk to sign on July 4.”