Bessent is steering U.S. Treasury debt financing toward short-term maturities, a risky strategy he himself once warned against.
On October 23, according to a report by the Financial Times, the U.S. Treasury Department will release its next quarterly borrowing plan on November 4. Markets expect the plan may further raise the share of short-term Treasury issuance, including cutting or even halting 20-year bond sales and increasing long-term Treasury buybacks. At present, the weighted average maturity of U.S. Treasury debt is less than six years, noticeably shorter than the United Kingdom's 13 years and roughly eight years for Germany, France and Japan. A further shift toward short-term debt would require the U.S. government to refinance maturing obligations more frequently.
Ironically, Bessent once publicly criticized former Treasury Secretary Yellen for shortening Treasury maturities, warning that the move would leave the United States "dangerously exposed to interest rate volatility." Now, however, he is preparing to push short-term debt financing even further, turning the very risk he once identified back into the center of policy debate.
Short-term debt offers lower yields and strong demand, helping to hold down near-term financing costs, but it also means the United States must refinance maturing debt more often. If rates rise in the future, the cost of rolling over that debt could increase accordingly. A short-term debt strategy can ease short-term financing pressure, but it cannot solve America's fiscal deficit problem.
Why has short-term debt become Bessent's choice?
Bessent's shift toward short-term financing stems first from the fact that current U.S. short-end rates are below long-end rates, making short-term issuance cheaper than selling long-term Treasuries and helping to reduce near-term interest expenses.
Demand-side factors also provide support. Expansion in the stablecoin industry is driving demand for short-term U.S. Treasuries, and the average maturity of Treasury holdings at the Federal Reserve is also shortening. At the same time, foreign investors' willingness to allocate to long-term U.S. debt is facing changes. Federal Reserve research data show that hedge funds doubled their U.S. Treasury holdings between 2023 and 2025, and now account for about 8.5% of the market. However, hedge fund trades usually involve leverage and relative-value strategies, so their holdings cannot simply be viewed as a stable long-term source of funds.
Bessent's optimistic assessment of the economic outlook is another pillar of this strategy. He believes that upward pressure on long-term yields from rising energy prices and concentrated debt issuance by technology companies may only be temporary, and that productivity gains from artificial intelligence could improve medium-term economic growth. Under that judgment, he believes long-term rates may be overestimated by the market, and the Treasury can first take advantage of lower short-end rates to finance.
But this strategy essentially trades maturity risk for a current cost advantage. Once short-term debt matures, it must be reissued. If inflation remains high, the market demands higher yields, or AI-driven productivity gains fall short of expectations, the interest savings today could be offset by higher refinancing costs in the future.
A multipronged effort to push down financing costs
Bessent's debt management strategy goes beyond adjusting issuance maturities. According to reports, he has also pushed to revise regulatory rules to encourage banks to increase their Treasury holdings, supported the development of the stablecoin industry, and sought to influence overseas official investors' holding decisions. At the same time, the Treasury is buying back some outstanding Treasuries to improve market liquidity and the supply-demand structure.
But these operations can hardly directly change America's long-term fiscal outlook. Recently, after Bessent increased long-term Treasury buybacks, yields still rose, showing that technical operations alone cannot reverse the market's judgment on inflation, Treasury supply and long-term risk.
In the future, Bessent may also seek more policy coordination, including pushing the Federal Reserve to expand its balance sheet or reassessing the book value of U.S. gold reserves. However, the Treasury cannot directly decide whether the Federal Reserve restarts quantitative easing. Even if gold revaluation improves the book size of assets, it would not directly increase fiscal revenue, let alone replace deficit reduction.
Short-term financing lowers costs but cannot solve the deficit problem
Bessent's strategy had previously achieved results for a time. He once successfully kept the 10-year U.S. Treasury yield below 4.5%. But the recent rise in yields again shows that the Treasury's influence on the bond market has limits. Long-term yields depend not only on supply and demand, but also reflect the market's judgment on future inflation, Treasury supply and term risk premiums.
The more fundamental problem is the U.S. fiscal deficit. Bessent has proposed reducing the deficit to 3% of gross domestic product (GDP), but the International Monetary Fund expects the U.S. fiscal deficit this year to still exceed 8% of GDP. The gap between the target and reality means that adjusting debt maturities cannot replace genuine fiscal consolidation.
Critics argue that Bessent is trying to ease financing pressure through debt management techniques and growth expectations brought by artificial intelligence, but has yet to offer a substantive plan sufficient to change America's fiscal trajectory. Cutting spending, increasing revenue or advancing bipartisan fiscal reform are the fundamental ways to solve the debt problem.
This also highlights the risk in Bessent's current strategy: if rates remain low, short-term debt financing can save some interest expenses; but if inflation rebounds, financing costs rise, or the growth dividend from artificial intelligence falls short of expectations, the United States could face concentrated refinancing pressure at a higher cost. The next quarterly borrowing plan to be released on November 4 will be an important window for observing the direction of this strategy, but whether U.S. debt can remain sustainable ultimately depends on whether the fiscal deficit can narrow and whether economic growth can keep pace with debt expansion.
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