Robin J Brooks says the U.S. Treasury’s growing reliance on short-term debt raises refinancing risk and, in his view, makes yield curve control an eventual policy outcome.
In a Nov. 4 newsletter, Brooks estimated U.S. debt issuance at $2.2 trillion over the 12 months through October, equivalent to 6.5% of gross domestic product. He put that at about twice the pace before the COVID-19 pandemic.
Brooks said Treasury has issued more short-term debt as longer-term yields have risen. That helps contain current financing costs, he argued, but means more debt must be refinanced sooner. Yield curve control, the outcome he anticipates, is a policy aimed at limiting bond yields.
Brooks contrasted the current pattern with two earlier periods. During the initial COVID-19 crisis, he said, emergency quantitative easing allowed Treasury to issue short-term debt at low yields ahead of pandemic stimulus. In 2023, Treasury used short-term borrowing to replenish the Treasury General Account, its cash balance at the Federal Reserve, after a debt ceiling standoff depleted it. Brooks said neither circumstance explains the current borrowing mix.
He also pointed to a Treasury debt buyback announcement in August, after a sharp bear-steepening in the U.S. yield curve. Brooks wrote that Treasury Secretary Bessent attributed the market move to thin liquidity and prices he considered out of line with fundamentals.
Separately, the Treasury’s daily par-yield curve put the 10-year rate at 4.95% and the 30-year rate at 5.32% on Nov. 3. Both were four basis points above their Nov. 2 readings. Those rates represent standardized points on the curve, rather than yields on particular Treasury securities.
Brooks also linked the borrowing pattern to political incentives. He argued that political divisions and close elections make fiscal restraint costly for both parties. He expected the midterm elections held Nov. 3 to leave those incentives unchanged.
