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Yahoo
21 minutes ago
- Yahoo
For Bond Dealers, It's Now All About Bills at Bessent's Treasury
(Bloomberg) -- Since Scott Bessent took the Treasury's helm in January, bond dealers have done a 180 on the key question about his issuance strategy in the $29 trillion market for US Treasuries. The High Costs of Trump's 'Big Beautiful' New Car Loan Deduction Can This Bridge Ease the Troubled US-Canadian Relationship? Budapest's Most Historic Site Gets a Controversial Rebuild Trump Administration Sues NYC Over Sanctuary City Policy At the start, the focus was how quickly he might ramp up sales of longer-term securities. That's after Bessent and other Republicans accused former Treasury Secretary Janet Yellen for artificially holding down sales of that kind of debt, and said it was an attempt to keep borrowing costs low before the election. Bessent quickly adopted the Yellen debt-management plan, however, and has repeatedly made clear he isn't about to boost issuance of notes and bonds because their yields are too high. Now the debate is about the limits of Treasury's bias to sell bills, which mature in up to a year. Dealers will be looking for clues in the Treasury Department's next formal update of debt-sales plans, due Wednesday. 'The commentary we've heard recently suggested that there isn't necessarily an urgency right now to start increasing long-end issuance, and that they can meet near-term needs with increased bill issuance,' Phoebe White, head of US inflation strategy at JPMorgan Chase & Co., said in a phone interview. For now, there's 'a backdrop where we have seen a lot of demand for bills,' including from the growth of money market funds, she said. But there are downsides to the Treasury relying more on bills, including higher volatility in interest payments as it rolls over maturing ones. President Donald Trump and his team say borrowing needs will shrink as growth picks up thanks to tax cuts enacted this month, as well as moves to scrap regulations and revive manufacturing. Plus there's rising revenue from tariffs. All of that in theory argues against boosting sales of long-term securities and locking in relatively high interest costs. The Treasury's latest gauge of how much it expects to borrow is due Monday afternoon. It's expected to almost double its previous estimate — mainly to account for a surge of bill sales needed to replenish the department's cash stockpile after Congress raised the debt limit earlier this month. Debt managers had to run down their cash balance while operating under the ceiling. Dealers expect a figure of $1 trillion or more for the July-September quarter. For next week's so-called quarterly refunding auctions, which include 3-, 10- and 30-year maturities, Wall Street expects no change from the past several quarters. That would leave the sales totaling $125 billion, made up of the following: $58 billion of 3-year notes on Aug. 5 $42 billion of 10-year notes on Aug. 6 $25 billion of 30-year bonds on Aug. 7 Forecasters predict outsize fiscal deficits for years to come, which would steadily increase the Treasury's need to issue debt. To prevent an over-reliance on bills, that means increasing sales of notes and bonds at some point. Dealers will be closely watching in Wednesday's statement for any tweak to the guidance that officials have had since January last year, that they plan to keep the size of those sales unchanged 'for at least the next several quarters.' If officials see the potential need to boost note and bond auctions starting in February 2026, they might remove the 'at least' wording from their guidance, White and her JPMorgan colleagues wrote in a recent note. But some dealers are betting on a later date. Bank of America Corp. this month scrapped its prediction that February 2026 would see the start of bigger note and bond auctions, now expecting the Treasury to hold off until 2027. Citigroup Inc.'s forecast is May 2026, with risk of a delay until later next year. The refunding announcement also may feature guidance on how much Bessent is prepared to allow bills outstanding to grow as a share of total US debt. If the Treasury continued to refrain from increasing note and bond issuance, the bill share would climb to 27% by 2028 — exceeding its peak in 2020, when sales were ramped up to pay for Covid relief — and to 41% by 2033, according to Citigroup Inc. strategists Alejandra Vazquez Plata and Jason Williams. They don't expect things to go that far, predicting the Treasury will likely have a 'soft cap' of around 25%. The Treasury Borrowing Advisory Committee, a panel of dealers, investors and other market participants, recommends the ratio should average around 20% over time, with 15% as a 'lower bound.' One thing to keep an eye on Wednesday is any 'charge' from the Treasury to the TBAC asking the panel to offer thoughts on broader trends in demand for Treasuries. JPMorgan's White said she's on the lookout for 'anything that would indicate that they're willing to let the weighted average maturity of the debt move shorter.' Buyback Program Bessent has repeatedly pointed to stablecoins as a new source of demand for bills, as new legislation mandates them to hold T-bills or other safe assets in reserve. The Federal Reserve, which has debated whether to skew its purchases toward bills, may be another one. Dealers will also be on watch for any news on the Treasury's program of buying back outstanding securities. The department in April said it was looking at 'enhancements' to that initiative, launched last year. Bessent drew attention to the program after a surge in Treasury market volatility triggered by concerns over Trump's tariff hikes. Barclays Plc strategists predict the Treasury will announce an increase in buybacks on Wednesday. Currently, buybacks are conducted to improve liquidity and aid the Treasury in its cash management. But Bloomberg Intelligence strategists Ira Jersey and Will Hoffman see the potential for a broader objective. The duo point out that Bessent has targeted 10-year yields — a benchmark for borrowing rates such as mortgages — and could deploy buybacks as a way to pressure them lower by cutting the average maturity of US debt. 'If the Trump administration believes long-term rates will fall with reduced supply of longer-term debt, this would be one way of testing that hypothesis,' they wrote. --With assistance from Alex Newman and Alexandra Harris. 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New York Post
22 minutes ago
- New York Post
Mark Levine will reinvest in Israel Bonds as next NYC comptroller — reversing Brad Lander divestment
The leading candidate for Big Apple comptroller says he will reinvest millions of dollars of city pension funds into Israeli bonds — after current Comptroller Brad Lander divested from them. When Lander took office in 2022, the pension funds of city government workers and retirees that he oversees had $39.9 million of assets in Israeli bonds. When the bonds matured, Lander did not reinvest in them, in effect divesting the pension funds from bonds that New York City had invested in since the 1970s. Advertisement Brad Lander did not reinvest in Israeli bonds, despite it being a standard practice by the city since the 1970s Adam Gray for New York Post A campaign rep for Levine — Manhattan's borough president and the Democratic nominee for comptroller and thus likely next comptroller — said his boss will invest in Israel government bonds again if elected. 'We have a globally diversified portfolio, and that should include investments in Israel and Israel Bonds, which have paid solid dividends for 75 years,' Levine had said during the June comptroller primary-race debate with rival and Brooklyn Councilman, Justin Brannan. Advertisement 'We are now the only pension fund in America without that investment,' Levine said at the time. 'I think prudent management for global diversity should include investment in those assets.' Lander was criticized during his mayoral campaign for divesting from Israeli bonds. Foes have noted that he and Israel-bashing socialist buddy Zohran Mamdani cross-endorsed each other in the city's Democratic primary in June — a move that is credited with helping propel the far-left Mamdani well in front of the pack to clinch the party's nomination. Lander recently spelled out his divestment decision in a response letter to First Deputy Mayor Randy Mastro, who had ripped the divesting. Advertisement Lander had accused prior comptrollers of investing pension funds from unionized workers in Israeli bonds for political reasons, not for prudent returns. The Big Apple first invested $30 million in State of Israel Bonds in 1974 under former city Comptroller Harrison Goldin through its pension funds for educators. 'We are now the only pension fund in America without that investment,' Mark Levine (pictured) said during June's debate. 'I think prudent management for global diversity should include investment in those assets.' Pacific Press/LightRocket via Getty Images 'The decision to invest only in Israel bonds, when the funds held no other country's bonds, and to invest assets intended for short-term cash management in longer-term bond instruments, was a political decision, not a fiduciary one,' Lander said in his July 13 letter. Advertisement 'The City's pension fund holdings of Israel bonds amounted to $39,947,160 at the time I took office in January 2022. In January 2023, those bonds matured, and our office was faced with the choice of whether or not to purchase new ones. We consulted our guidelines and made the prudent decision to follow them, and therefore not to continue investing in the sovereign debt of just one country.' Lander, who is Jewish and a self-described Zionist, added, 'To summarize: We treat investments in Israel as we treat investments in any other country. No better, and no worse. 'The [Boycott, Divestment, Sanctions] Movement asks investors to treat Israel worse than other countries; I oppose this effort. You appear to be asking that the City's pension funds treat Israel better than all other countries. That would also be politically motivated, and inconsistent with fiduciary duty.' He then accused Mayor Eric Adams of using the city's divestment of Israeli bonds as a 'cynical ploy' in his desperate re-election campaign. But Lander's predecessor as comptroller, Scott Stringer, said Lander was out of line for claiming that Israeli bonds are not a worthy investment. 'Brad got busted for BDS'ing the pension system. He got caught, and now he has to own up to it,' Stringer told The Post. Stringer said he was infuriated with Lander for claiming Stringer and other prior comptrollers invested in Israeli bonds for political, not sound financial, reasons. Advertisement He said Israeli bonds had always been a sound investment and told Lander to 'f–k off. 'If you get busted, you can't be trusted,' Stringer said. Israeli bonds are considered a solid investment, accumulating about 5% returns on average a year, records show. The New York state pension system, run by state Comptroller Tom DiNapoli, has more than $360 million invested in the Jewish state.
San Francisco Chronicle
22 minutes ago
- San Francisco Chronicle
As Trump shows off his golf courses for Britain's leader, crisis in Gaza looms
EDINBURGH, Scotland (AP) — President Donald Trump once suggested his golf course in Scotland 'furthers" the U.S.-U.K. relationship. Now he's getting the chance to prove it. British Prime Minister Keir Starmer is meeting Monday with Trump at a golf property owned by the president's family near Turnberry in southwestern Scotland — then later traveling to Abderdeen, on the country's northeast coast, where there's another Trump golf course and a third is opening soon. During his first term in 2019, Trump posted of his Turnberry property, 'Very proud of perhaps the greatest golf course anywhere in the world. Also, furthers U.K. relationship!' Starmer is not a golfer, but toggling between Trump's Scottish courses shows the outsized influence the president puts on properties bearing his name — and on golf's ability to shape geopolitics. However, even as Trump may want to focus on showing off his golf properties, Starmer will try to center the conversation on more urgent global matters. He plans to urge Trump to press Israel to allow more aid into Gaza and attempt to end what Downing St. called 'the unspeakable suffering and starvation' in the territory, while pushing for a ceasefire in Israel's war with Hamas. Britain, along with France and Germany, has criticized Israel for 'withholding essential humanitarian assistance' as hunger spread in Gaza. Over the weekend, Starmer said Britain will take part in efforts led by Jordan to airdrop aid after Israel temporarily eased restrictions. But British Business Secretary Jonathan Reynolds acknowledged Monday that only the U.S. has 'the leverage' to make a real difference in the conflict. Still, asked about the crisis in Gaza on Sunday night, Trump was largely dismissive — focused more on how he's not personally gotten credit for previous attempts to provide food aid. 'It's terrible. You really at least want to have somebody say, 'Thank you,'' Trump said. The president added, 'It makes you feel a little bad when you do that" without what he considered proper acknowledgement. Starmer is under pressure from his Labour Party lawmakers to follow France in recognizing a Palestinian state, a move both Israel and the U.S. have condemned. The British leader says the U.K. supports statehood for the Palestinians but that it must be 'part of a wider plan' for a two-state solution to the Israel-Palestinian conflict. Also on Monday's agenda, according to Starmer's office, are efforts to promote a possible peace deal to end fighting in Russia's war with Ukraine — particularly efforts at forcing Russian President Vladimir Putin to the negotiating table in the next 50 days. Trump in the past sharply criticized Ukrainian President Volodymyr Zelenskyy for also failing to express enough public gratitude toward U.S. support for his country, taking a similar tack he's now adopting when it comes to aid for Gaza. The president, though, has shifted away from that tone and more sharply criticized Putin and Russia in recent weeks. On Tuesday, Trump will be at the site of his new course near Aberdeen for an official ribbon-cutting. It opens to the public on Aug. 13 and tee times are already for sale — with the course betting that a presidential visit can help boost sales. Protesters have planned a demonstration in Balmedie, near Trump's existing Aberdeen golf course, after demonstrators took to the streets across Scotland on Saturday to decry the president's visit while he was golfing. Starmer and Trump are likely to find more common ground on trade issues. While China initially responded to Trump's tariff threats by retaliating with high import taxes of its own on U.S. goods, it has since begun negotiating to ease trade tensions. Starmer and his country have taken a far softer approach. He's gone out of his way to work with Trump, flattering the president repeatedly during a February visit to the White House, and teaming up to announce a joint trade framework on tariffs for some key products in May. Starmer and Trump then signed a trade agreement during the G7 summit in Canada that freed the U.K.'s aerospace sector from U.S. tariffs and used quotas to reduce them on auto-related industries from 25% to 10% while increasing the amount of U.S. beef it pledged to import. Discussions with Starmer follow a Trump meeting Sunday with European Commission chief Ursula von der Leyen at his Turnberry course. They announced a trade framework that will put 15% tariffs on most goods from both countries, though many major details remain pending. The president has for months railed against yawning U.S. trade deficits around the globe and sees tariffs as a way to try and close them in a hurry. But the U.S. ran an $11.4 billion trade surplus with Britain last year, meaning it exported more to the U.K. than it imported. Census Bureau figures this year indicate that the surplus could grow. There are still lingering U.S.-Britain trade issues that need fine-tuning. The deal framework from May said British steel would enter the U.S. duty-free, but it continues to face a 25% levy. U.K. Business Secretary Jonathan Reynolds said Monday that 'negotiations have been going on on a daily basis' and 'there's a few issues to push a little bit further today,' though he downplayed expectations of a resolution. The leader of Scotland, meanwhile, said he will urge Trump to lift the current 10% tariff on Scotch whisky. First Minister John Swinney said the spirit's 'uniqueness' justified an exemption. Even as some trade details linger and both leaders grapple with increasingly difficult choices in Gaza and Ukraine, however, Starmer's staying on Trump's good side appears to be working — at least so far.
