They are bills because the government was getting better rates on bills than bonds. The 10 years is starting to get below t bills which should allow the government to clock in on lower rates for 10 years before inflation kicks in from growth.
The big question: does the Fed do QE or Congress need to pass anything to help kickstart the next growth cycle.
Sure, that's true, but another reason Yellen did so much bill issuance was to avoid blowing out the 10yr yield which would have sent mortgage rates even higher. My point here is this:
1. This isn't some sort of 4-D chess plan to bring long rates down to refinance debt. The last time SPY & QQQ were at current price levels (open on 08/05/24) the 10yr yield was 30 BPS lower. If this is being done on purpose, it isn't being done well, as long rates are higher than they were then (when there was no plan), and much more equity wealth has been wiped away since SPY and QQQ rallied 7-9% above their pre August '24 swoon highs.
2. Terming out the expiring debt from bills to 10+ yr debt would spike yields quite substantially, which would raise mortgage rates. Bessent mentioned today that long rates going down should lead to a spike in mortgage applications/refis as those rates go down. They want more people to be able to buy homes. Terming out the debt is counter to that goal.
3. Inducing a recession to refinance debt is a bonkers idea. Can we save money on future debt service costs? Sure a bit. Would we save more money than Treasury loses in tax receipts? I would wager no. Is it possible a "controlled demolition" spirals out of control? Yes.
Stanley Druckenmiller's criticism of Biden/Yellen (where I believe all this stems from) was sound, IMO. They were derelict in not terming out the debt, as they had ~14 months when the economy was fine with the 10yr yield trading below pre-covid levels (and 2-300 BPS below where it is now)
The Fed isn't going to do anything until credit markets break down and/or unemployment becomes an issue. At Trump's inauguration high-yield spreads were at their lowest level since before the GFC. They've gone up since then, but if history is any guide when they go up from as low of a base as they did now, in '97, and in '07 (dates may not be perfect am on phone) they have to rise to much higher levels than they're at now to cause the sort of stress that will get the Fed's attention. I think the health of the credit markets is a big reason why the Trump admin is swinging for the fences here. They do not care about highly levered speculators blowing up in equities, and they think they won't suffer much of a political hit from supporters who own equities because those folks will see lower energy costs and can get cheaper mortgages/refi them.
The tax cuts bill in Congress should help a bit, but without more certainty the immediacy of any growth effect will likely be more muted than in the first term as corporations will be disinclined to spend capital in such an uncertain environment.
