Trump Wants to Bring Down Treasury Yields

Forget about the Federal Reserve. To lower borrowing costs for Americans, the Trump administration is now looking to reduce spending and boost energy production, signaling a shift in strategy.

While President Trump continues to push the Federal Reserve to lower short-term interest rates, Treasury Secretary Scott Bessent has recently suggested that both he and Trump are focusing less on the central bank's actions and more on lowering a crucial market-driven rate: the yield on the 10-year Treasury note, a benchmark for borrowing costs across the economy.

The 10-year Treasury yield is a key indicator for long-term interest rates, influencing everything from mortgage rates to car loans, and its movement directly affects the cost of borrowing for both individuals and businesses. A lower yield can stimulate economic activity by making it cheaper for consumers to borrow and for companies to invest.

However, Trump's push to lower Treasury yields faces significant hurdles. For one, his own tax policies, which have prioritized tax cuts and significant government spending, could put upward pressure on yields by increasing government debt. As the U.S. borrows more to finance its deficit, investors may demand higher yields to compensate for the increased risk of holding U.S. debt.

Additionally, the move to focus on reducing government spending and increasing energy production could also prove to be a double-edged sword. While these measures could help ease fiscal pressures in the long run, they may face political challenges and require time to yield results.

For now, the administration is shifting its attention toward market-driven solutions and efforts outside the traditional monetary tools of the Federal Reserve. However, whether this approach will be effective in lowering borrowing costs remains uncertain, especially given the complex dynamics of fiscal policy, inflation, and global economic conditions.