A potential slowdown of the Federal Reserve’s balance sheet drawdown and Treasury Secretary Scott Bessent’s assurance against imminent long-term debt hikes could offer relief in the near term to bond market jitters as fiscal concerns linger.

Fed minutes from the January 28-29 rate-setting meeting released this week showed officials weighed a possible pause or slowdown of the Fed’s balance sheet reduction, known as quantitative tightening (QT), as a binding government debt cap could complicate the central bank’s ability to gauge market liquidity.

Treasury yields, which move inversely to prices, declined after the Fed minutes on Wednesday and Bessent’s interview injected further optimism pushing yields lower on Thursday.

Still, his remarks did not disrupt market expectations of increased government debt, as investors and analysts anticipate the Treasury will eventually need to borrow more to offset a drop in government revenues from President Donald Trump’s proposed tax cuts.

Source: FINANCE.YAHOO