This Is How Treasury Really Funds Trillions of Dollars of US Debt

When it comes to financing the US government's borrowing needs, the Treasury Department has some discretion in how it's done. It can sell 30-year Treasuries. It can sell 10-year Treasuries. It can sell a lot of three-month T-bills. Every quarter, it's always going to be some kind of mix. And in theory, the decisions about where on the curve it issues debt can have effects on the market and the economy, since different instruments have different liquidity and risk profiles. Recently, the Treasury has come under criticism for issuing a lot of short-dated debt. Some economists have dubbed it "Activist Treasury Issuance," with the allegation that Janet Yellen & Co. are purposely trying to counteract the impact of the Federal Reserve's quantitative tightening by issuing less debt at the long end of the curve. So is there anything to these criticisms? And how exactly does the Treasury go about making these decisions anyway? On this episode, we speak to a dissenting voice who argues that the Treasury has approached the task using the same methods it has always employed. Amar Reganti is a fixed-income strategist at Wellington Management and Hartford Funds, who earlier in his career spent four years at Treasury in the Office of Debt Management. He walks us through the Treasury's general issuance approach, why the funding mix changes over time, why it's been issuing more at the short end in recent quarters, and the overall strategy the government will use to fund what the Congressional Budget Office estimates will be another $20 trillion worth of borrowing over the next decade. This transcript has been lightly edited for clarity.