“He and I are focused on the 10-year Treasury,” Bessent stated. “He is not calling for the Fed to lower interest rates.”
By Bena Ilyas
Edited by Julia Sakovich
Updated
3 mins read
US Treasury Secretary Scott Bessent revealed a new economic strategy Wednesday, emphasizing efforts to lower borrowing costs by bringing down the 10-year Treasury yield. Speaking to Fox Business, Bessent made it clear that President Donald Trump is not advocating for a Federal Reserve rate cut but is instead targeting the 10-year yield directly.
“He and I are focused on the 10-year Treasury,” Bessent stated. “He is not calling for the Fed to lower interest rates.”
The 10-year yield, often referred to as the “risk-free rate,” plays a vital role in determining borrowing costs across the economy, influencing mortgages, business loans, and other long-term financial instruments. Lowering that rate could encourage investment and risk-taking, which historically benefits markets, including cryptocurrency.
A declining 10-year yield often signals bullish momentum for risk assets, including Bitcoin BTC $87 338 24h volatility: 0.1% Market cap: $1.73 T Vol. 24h: $30.33 B . Trump’s approach to controlling inflation and addressing the budget deficit could significantly impact market sentiment. Lower inflation tends to create conditions where the Federal Reserve has more room to cut interest rates, adding fuel to asset price growth.
“The energy component for them is one of the surest indicators for long-term inflation expectations,” Bessent said, reinforcing the administration’s commitment to boosting energy production as a tool to combat inflation. By ramping up the energy supply, inflation could ease, supporting the Fed’s ability to continue rate cuts.
Since September, the Federal Reserve has already reduced its benchmark rate by 100 basis points, bringing it to a range of 4.25%-4.5%. If inflation continues to cool, further reductions could follow, benefiting both traditional markets and cryptocurrency.
Another key pillar of Bessent’s economic approach is addressing the soaring US budget deficit. His strategy focuses on reducing fiscal spending to bring the deficit down, a move that could lower bond issuance, push bond prices higher, and ultimately suppress yields.
Interviewed by Lawrence Kudlow, former National Economic Council director under Trump, Bessent reaffirmed the administration’s commitment to its “3-3-3” plan — bringing the fiscal deficit down to 3% of GDP, increasing oil production by 3 million barrels per day, and maintaining economic growth at 3%.
.@BBKogan and I did the math on Bessent's 3-3-3 plan.
— Brendan Duke (@Brendan_Duke) February 5, 2025
Even if you (wrongly) assume persistent 3% economic growth, Bessent's 3% deficit target requires massive middle-class tax increases and a 31% cut to programs like SNAP/Medicaid.
All while cutting taxes for the rich. https://t.co/yOyAcAqoe6 pic.twitter.com/074J45RPGk
“Now that I’m in the seat, I believe in it more than ever,” Bessent said, expressing confidence in the strategy. He also emphasized that while government spending has contributed to economic expansion under President Joe Biden, Trump’s economic philosophy is centered on private-sector-led growth, driven by capital investment and a revival of domestic manufacturing.
However, reducing government spending presents a double-edged sword. Under Biden, fiscal expansion helped offset the impact of high Federal Reserve rates, keeping financial markets stable. Any abrupt reduction in spending could introduce volatility, particularly for risk assets like Bitcoin.
This fiscal shift could mean less liquidity in the markets, potentially creating short-term instability for cryptocurrencies and other speculative investments. At the same time, a stable long-term fiscal outlook could restore investor confidence, offering a more sustainable foundation for growth.
Beyond Treasury policies, Bessent also addressed concerns about Trump’s 2017 tax cuts, which are set to expire at the end of this year. He reaffirmed the administration’s commitment to making those cuts permanent.
Meanwhile, the Treasury has been reviewing the role of Elon Musk’s D.O.G.E. group concerning federal payment systems. Bessent clarified that no external entity has decision-making power over Treasury transactions. “At the Treasury, our payments system is not being touched,” he stated, underscoring the department’s commitment to financial integrity.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
With over 3 years of crypto writing experience, Bena strives to make crypto, blockchain, Web3, and fintech accessible to all. Beyond cryptocurrencies, Bena also enjoys reading books in her spare time.
