Short-Term Debt, Long-Term Impact: Treasury’s Strategy in Focus

• The Treasury releases quarterly refunding details today.

• Expect it to remain focused on short-term borrowing.

• The plan should drive long-term yields lower.

The White House wants cheaper debt while the bond market wants clarity. This morning, we get both…

Since taking office in January, Treasury Secretary Scott Bessent has pursued one clear goal: lower the yield on U.S. Treasurys. He keeps emphasizing the point that cheaper yields mean lower borrowing costs for households and businesses. After all, Treasury rates anchor everything from mortgages to auto loans. The White House, he says, is committed to using every tool at its disposal to bring yields down.

At first, Bessent assumed the Federal Reserve would lend a hand by cutting interest rates. But the White House’s tariff policies stirred fresh uncertainty around growth and inflation, leaving Fed officials hesitant until recently. So, Bessent turned to other levers.

He’s pushed the administration to manage long-term financing costs without relying on monetary policy. They’ve leaned on fiscal tools like deregulation and energy price stabilization to massage yields lower. And as the next chart shows, they’ve had some success. After starting the year near 4.8%, the 10-year yield has drifted down to 4.1%...

Yet, the stakes are still high. Roughly half of the $28 trillion in publicly held U.S. debt matures over the next three years. With an average coupon of just 3.3%, refinancing at current rates could tack on as much as $300 billion to the deficit, according to Wells Fargo. Without more help from the Fed, that task could get dicey.

Today, Bessent has a chance to push the effort forward. The Treasury will release its Quarterly Refunding Announcement (“QRA”). If it sticks with the current strategy of favoring short-term issuance, that could boost demand for longer-dated Treasurys. Any resulting drop in yields should boost the corporate margin outlook and serve as another tailwind for the S&P 500.

But don’t take my word for it, let’s look at what the data’s telling us…

Each quarter, the Treasury outlines its borrowing plans to meet the government’s financial obligations. It also breaks down the maturity mix and updates funding projections. Together, these details give investors a window into how high spending might go, and for how long.

On Monday, the Treasury endorsed a fourth-quarter net borrowing estimate of $569 billion, down from its July projection of $590 billion and well below the $1.1 trillion borrowed in the third quarter. The drop stems from a higher-than-expected starting cash balance. The Treasury noted that if not for weaker net cash flows, the estimate could have been even lower.

Still, the real catalyst arrives this morning when we learn more about the maturity mix.

When Bessent first took the reins, Wall Street expected a pivot toward longer-term borrowing. Momentum traders shorted Treasurys early in 2025, betting on higher yields for longer-dated paper. But when Bessent stuck with short-term issuance, yields began to ease.

Now, with yields holding steady, Wall Street expects the Treasury to stay the course. The logic: by issuing shorter-duration debt, the Treasury can contain long-term borrowing costs, and potentially pivot later, once the Fed has cut rates more aggressively.

For institutional investors, that outlook could be bullish for stocks. Lower interest rates mean companies can refinance debt or borrow at lower rates, saving cash in the process. In addition, Treasury bonds sitting on banks’ balance sheets at lower yields could start to become performing assets once more, increasing the amount of cash available to lend. All of that would boost the outlook for spending and hiring.

Meanwhile, money market funds are flush with cash. In fact, the amount has swelled by 5% over the past three months…

Today, more than $7.4 trillion sits in money market assets—double the $3.6 trillion parked there before the pandemic. These funds typically invest in highly liquid, short-term instruments, looking to take advantage of attractive yields: the 2-year note pays 3.6%, and 3-month Treasury bills offer 3.9%. Last quarter, those rates were 3.9% and 4.3%, respectively. With Wall Street expecting three more Fed rate cuts by mid-2026, now may be the time to lock in current yields on shorter-duration debt.

This surge in money market assets gives the Treasury an edge. It can issue more short-term debt without pushing yields higher, thanks to short maturities and strong demand. At the same time, limiting long-term issuance could tighten supply, nudging asset managers to bid up prices on existing 10-year notes—and push yields lower.

As I mentioned earlier, every basis point Bessent can shave off borrowing costs helps reduce future interest obligations. If it sparks a growth rebound—driven by cheaper financing for households and businesses—all the better. More growth could mean more tax revenue without higher spending.

So, if today’s QRA confirms expectations, it could pave the way for easing 10-year yields—and a steady rally in the S&P 500.

Check out the BentPine Conservative Portfolio here if you’d like to see how I’d invest.

Five Stories Moving the Market:

Republican and Democratic senators signaled optimism about reaching a bipartisan deal to end the government shutdown, while striking cautionary notes about how quickly lawmakers could resolve the impasse that is now on track to be the longest ever – WSJ. (Why you should care – lawmakers suggested the shutdown could end as soon as this weekend)

The fourth quarter revenue forecast from Advanced Micro Devices failed to impress investors after an eye-popping rally sent expectations soaring; the company sees fourth-quarter revenue of roughly $9.6 billion, compared to the estimate for $9.2 billion, but short of the high-end expectation for $9.9 billion – Bloomberg. (Why you should care – CEO Lisa Su said the AI business should generate tens of billions of dollars in annual revenue by 2027)

Super Micro Computer missed Wall Street estimates for quarterly profit and revenue, hit by a shift in delivery schedules for large artificial intelligence deals – Reuters. (Why you should care – the issue could be one-time in nature as the company said $1.5 billion in revenue was pushed out to the next quarter due to last minute configuration changes by a high-volume customer)

A growing number of policymakers at the Bank of Japan believed that conditions were falling into place for interest rates to rise, with two members advocating an immediate increase, according to minutes of the central bank's September meeting – Reuters. (Why you should care – policymakers sounded less worried about U.S. tariff policies hurting Japan’s economy)

Microsoft has committed more than $60 billion to neocloud data center companies, evidence of the company’s race to find enough computing capacity for its AI needs – Bloomberg. (Why you should care – by renting access to capacity, issues like access to energy and compute power should have already been solved)

Pre-Market Levels:

S&P Futures -0.21%, Nasdaq Futures -0.39%, Dow Jones Futures +0.02%, Russell 2000 Futures +0.12%

Europe:

EuroStoxx 50 -0.62%, UK FTSE +0.03%, German DAX -0.61%, French CAC -0.18%, Italian MIB -0.44%, Spanish IBEX -0.77%

Asia:

Japan's Nikkei -2.50%, Japan's TOPIX -1.35%, China's Shanghai Composite +0.23%, Hong Kong Hang Seng -0.07%, South Korea's KOSPI -2.85%, Taiwan's TSE -2.02%

Currencies:

Dollar -0.03%, Euro +0.03%, Japanese Yen +0.02%, British Pound +0.06%, Canadian Dollar -0.24%, Swedish Krona -0.05%, Swiss Franc -0.01%

Risk:

VIX +3.16%, Bitcoin -2.33%, Ethereum -5.62%

Growth:

WTI Crude +0.15%, Brent Crude +0.16%, Nat Gas -2.10%, Copper -0.51%

Safety:

Gold +0.37%, Silver +0.36%

Sovereign Bonds:

U.S. Treasury 10-yr yield -0.8bps at 4.083%

U.S. Treasury 2-yr yield -1.4bps at 3.57%

German 10-yr yield -0.2bps at 2.65%

French 10-yr yield +0.2bps at 3.436%

U.K. 10-yr yield +0.9bps at 4.431%

Japanese 10-yr yield -2.8bps at 1.664%

Economic Calendar:

Earnings: APA, APP, DVN, FIS, HUM, JCI, MCD, MET, QCOM

RBNZ’s Orr (Governor) SpeaksBOJ Monetary Policy Meeting Minutes China – Caixin Services, Composite PMI for October Germany – Factory Orders for September (2:00 a.m.) Riksbank (Sweden) Monetary Policy Announcement (4:30 a.m.) Eurozone – HCOB Eurozone Services, Composite PMI (Final) for October (4:00 a.m.) U.K. – S&P Global U.K. Services, Composite PMI (Final) for October (4:30 a.m.) ECB’s Nagel (Germany) Speech (5:00 a.m.) U.S. - MBA Mortgage Applications (7 a.m.) U.S. – ADP Nonfarm Employment Change for October (8:15 a.m.) U.S. – S&P Global U.S. Services, Composite PMI (Final) for October (9:45 a.m.) U.S. – ISM Non-Manufacturing PMI for October (10:00 a.m.) U.S. - Energy Information Administration Crude Oil Inventory Data (10:30 a.m.) BOE’s Breeden (Deputy Governor) Speaks (11:10 a.m.)