Once the drama surrounding the election of the new Treasury Secretary passes, he will have an interesting task ahead. He will need to issue new debt to replace the $9Tn that are maturing over the next 12 months, mostly treasury bills, and extend durations, so he can lock current interest rates before inflation picks up, and convince the world that US treasuries are a safe and profitable investment option. As you can see in the chart on the left below, the current share of T-bills is higher than recommended, and on the right, you can see that bills are affecting the overall cost of debt, pushing it higher, and breaking the downtrend that rates had over the last 25 years. The new secretary will also face the headwind of the budget deficit, thats pushing the national debt by $1Tn every three months. Difficult to see lower rates ahead for treasuries.
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