Treasurer Optimistically Expects Trump to Sign Tax Reform Bill
U.S. Treasury Secretary Besant expressed confidence in an interview with Bloomberg Television on Monday that Trump will sign the comprehensive tax bill before July 4, stating that this legislation is the "beginning of solving the debt issue" and will help reverse the debt growth trend and reduce U.S. debt levels.
Despite controversy over parts of the bill, Besant clearly opposed cutting Medicaid plans, indicating that the government is striving to balance social security and debt control as it advances tax reform.
Debt Issuance Strategy Continues, Focus on Yield Decline
Addressing market concerns about the structure of U.S. debt issuance, Besant emphasized that it is not advisable to increase the proportion of long-term U.S. debt issuance at present, stating that if long-term debt issuance is to be expanded, the best window was back in 2021-2022, rather than pushing forward blindly when current interest rates are at higher levels.
He noted that the current 10-year U.S. Treasury yield is about 4.26%, the 2-year is at 3.73%, and the 12-month is at 3.81%. If U.S. interest rates are one standard deviation above the long-term average, rashly increasing long-term debt issuance would only exacerbate the fiscal burden.
Besant remains cautiously optimistic about future U.S. Treasury yield trends, stating that if inflation further declines, the yield curve is expected to experience a "parallel downward shift" within the year, helping to lower long-term borrowing costs and create space for fiscal operations.
Federal Reserve Leadership Change Plan on the Agenda
In the interview, Besant publicly revealed for the first time that he will officially study the succession issue of Federal Reserve Chairman Powell in the coming weeks to months. He stated, "I have considered the possibility of an insider from the Board of Governors taking over as chairman," and mentioned that there will be a vacancy on the Board of Governors in January next year, suggesting that the leadership change plan may accelerate.
Besant criticized the Federal Reserve for "seeming stagnant," failing to respond to high inflation in 2022 in a timely manner, burdening the American public. He believes the current Federal Reserve lacks foresight, "focusing on the present rather than looking to the future."
He added that if Powell steps down, his term on the Board of Governors will have only two years left, potentially accelerating the pace of leadership adjustments at the Federal Reserve.
Expectation for Intensive Signing of Trade Agreements Increases
When discussing trade issues, Besant stated the U.S. has not observed tariffs leading to significant inflation and emphasized, "Nothing is more temporary than import tariffs," alleviating market concerns about tariffs driving up consumer prices.
He expects a wave of trade agreements to be signed intensively in the last week before the July 9 trade negotiation deadline and warned that if relevant countries "remain stubborn," the U.S. may return to the tariff increase path of April 2.
Stablecoin Legislation and Housing Finance Reform Await Progress
Besant revealed that the U.S. Treasury plans to advance the process of stablecoin legislation by mid-July to promote compliance development in the digital financial market. Meanwhile, structural reforms of Freddie Mac and Fannie Mae will be advanced following the completion of trade agreements and tax reform agenda, laying a foundation for the stability of the U.S. housing finance system.
Fiscal and Monetary Policy Trends Will Impact Global Markets
Analysts believe that if Trump successfully signs the tax reform bill before July 4, it will further clarify the path of U.S. fiscal easing, combined with potential Federal Reserve leadership change signals, affecting the dollar's trend, U.S. Treasury yields, and the global capital flow pattern.
Additionally, if U.S. Treasury yields decline as Besant expects, it will create a more favorable environment for adjusting the U.S. debt structure. The market is closely watching the linkage of U.S. fiscal and monetary policies to determine the pace and opportunities of the global financial market in the second half of the year.
