More Yellen: There is an advantage to funding debt with long-term debt issuance

Author: Greg Michalowski | Category: News

Yellen on debt financing

More from Treasury Secretary nominee Yellen:
  • there is advantage to finding data with long-term debt issuance
  • asked about 50 year bond said would be pleased to look at issue and possible market for bonds of that maturity
  • some investment programs for public sector would have strong returns that argue in favor of borrowing to finance them
  • crucial keep in mind interest burden on debt in the term of GDP
  • as debt grows, need more tax revenue needed to pay the interest, and curtails other spending
With interest rates so low, the risks for the surge in US debt is a precipitous rise in interest rates. Borrowing longer-term and matching against longer-term infrastructure investment programs makes sense. However, it is a small piece of the overall debt that the US will need to fund. The yield curve has steepened a bit after the comments with 2 year now down -0.2 bps which the 30 year bond is up 1.6 bps.  

On schools Yellen says:
  • Schools need more resources
  • Pres. elect Biden wants to open up schools in the next 100 days
Other comments:
  • Social Security, Medicare have played an essential role for Americans. These benefits must be preserved
  • one way to diminish imbalances is to find ways to deliver healthcare more cheaply, efficiently
  • Focus is now on providing relief and not raising taxes
  • It is important that corporations and high net worth individuals pay their fair share of taxes
  • Treasury Secretary has to be a voice for fiscal sanity, pledges to do that
  • low interest rates are likely for a long time

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